MERRILL LYNCH
ASSET BUILDER
PROGRAM, INC.
FUND LOGO
Annual Report
January 31, 1997
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
Jay C. Harbeck, Vice President
Lawrence R. Fuller, Vice President
Gregory Mark Maunz, Vice President
Kevin M. Rendino, Vice President
Thomas R. Robinson, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
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
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.
Important
Tax Information
(unaudited)
<PAGE>
Fundamental Value Portfolio
Of the ordinary income distribution paid by Fundamental Value
Portfolio to shareholders of record on December 12, 1996, 16.93%
qualifies for the dividends received deduction for corporations and
0.94% is attributable to income from Federal obligations. Additionally,
the Portfolio paid a long-term capital gain distribution of $.248102
per share to shareholders of record on December 12, 1996.
Global Opportunity Portfolio
Of the ordinary income distribution paid by Global Opportunity
Portfolio to shareholders of record on December 12, 1996, 17.26%
qualifies for the dividends received deduction for corporations and
5.80% is attributable to income from Federal obligations. Additionally,
the Portfolio paid a long-term capital gain distribution of $.122433
per share to shareholders of record on December 12, 1996.
Growth Opportunity Portfolio
There were no distributions paid by Growth Opportunity Portfolio
during the year.
Quality Bond Portfolio
Of the ordinary income distributions paid monthly by Quality Bond
Portfolio during the fiscal year ended January 31, 1997, 11.46% is
attributable to income from Federal obligations. None of the monthly
distributions qualify for the dividends received deduction for
corporations. Additionally, the Portfolio paid a short-term capital
gain distribution of $.037239 per share to shareholders of record on
December 18, 1996. There were no long-term capital gain
distributions paid by the Portfolio during the year.
US Government Securities Portfolio
Of the ordinary income distributions paid monthly by US Government
Securities Portfolio during the fiscal year ended January 31, 1997,
3.66% is attributable to income from Federal obligations. None of
the monthly distributions qualify for the dividends received
deduction for corporations. Additionally, the Portfolio paid a short-
term capital gain distribution of $.067715 and a long-term capital
gain distribution of $.004910 per share to shareholders of record on
December 18, 1996.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Please retain this information for your records.
<PAGE>
DEAR SHAREHOLDER
We are pleased to provide you with this 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 aggregate and average
annual total returns, for all five portfolios can be found on pages
6--13 of this report to shareholders.
Fundamental Value Portfolio
Fiscal Year in Review
1996 turned out to be much the same as 1995. For the second straight
year, low interest rates, modest inflation and modest economic
growth fueled the US stock market to record highs. The "Goldilocks"
(not too hot, not too cold) economy of slow growth and low interest
rates created an environment more favorable to stable growth stocks
than to economically sensitive companies. Stocks of cyclical
companies did not fare well, as earnings are tied to the economic
cycle and were thought to be at risk.
Against this backdrop, the Portfolio underperformed the Standard &
Poor 500 Index (S&P 500) for the fiscal year ended January 31, 1997,
as a result of the Portfolio's value emphasis which resulted in a
large commitment to economically sensitive equities. However, our
returns for the year were quite good compared to other broad market
indexes. For the year ended January 31, 1997, the Portfolio's Class
A, Class B, Class C and Class D Shares had total returns of +23.20%,
+21.79%, +21.82% and +22.82%, respectively.
Recent activity in the stock market led to an even wider disparity
between valuation levels of cyclical and non-cyclical securities. We
believe much of the underperformance in groups such as auto, copper,
paper and steel stocks was overdone, and many of these stocks are
discounting dire economic circumstances which we believe are
unlikely to occur. In this environment, valuations of economically
sensitive equities declined to levels not seen in years, while
defensive and stable growth stock valuations were bid up to premium
price/earnings ratios.
<PAGE>
We remain committed to out-of-favor securities such as Ford Motor
Co. (selling at 6.3 times 1997 estimated per share earnings),
General Motors Corp. (7.3 times), USX-U.S. Steel Group, Inc. (12.5
times), and Phelps Dodge Corp. (10.5 times). We believe these stocks
will do better once investors become convinced that a slower-growth
environment does not portend a recession. In fact, fourth-quarter
gross domestic product (GDP) growth came in at a robust 3.9%, hardly
a signal that we are on the cusp of a recession. Conventional wisdom
seems to suggest that the Goldilocks economy is going to last
indefinitely. However, conventional wisdom often has proven to be
wrong in the past. Current stock market valuations are at
historically high levels. The S&P 500 dividend yield of 2.0% is the
lowest in this century; the S&P 500 price/book value per share ratio
of over 4.0 is the highest ever; and the US stock market has a
greater value than US GDP for the first time ever.
It is possible to argue that current valuations in the US stock
market already discount favorable US economic conditions. We have
little conviction that the present bull market will continue at its
current pace. We expect increased volatility in 1997 as the economy
and interest rates sort themselves out. We will continue to seek out-
of-favor companies whose stock valuations fit our strict parameters
of low price/book and price/earnings ratios. At January 31, 1997,
the Portfolio was valued at half the market on a price/book
valuation and two-thirds the market on a price/earnings valuation.
Investment Activities
During the January quarter, we added nine new companies to the
Portfolio: Black & Decker Corp., Dow Jones & Company, Inc., Great
Lakes Chemical Corporation, GTE Corp., Harrah's Entertainment, Inc.,
Integrated Device Technology, Inc., ITT Corp., Mentor Graphics
Corporation, and Transitional Hospitals Corp. We added Black &
Decker Corp. following a disappointing earnings forecast for the
fourth quarter. A delayed plant start-up in Brazil, slower sales in
Europe and Australia and a 10%--15% price decline for Black &
Decker's corded power tools all contributed to the disappointment.
The recent quarterly report was the first time Black & Decker's
earnings fell below expectations in three years, and we believe
investors over-reacted. Although the stock fell out of favor, we
believe the company's prospects suggest the potential for a higher
stock price in the upcoming quarters as it ex-pands its strong brand
franchise throughout the Far East and Latin America. At the current
price, Black & Decker trades at one-half the S&P 500 on a price/book
ratio and two-thirds the market multiple on a price/earnings ratio
basis.
We completed eight sales during quarter ended January 31, 1997,
including ADT Ltd., Camden Property Trust, Community Psychiatric
Centers, Downey Financial Corporation, Fingerhut Companies, Inc.,
Micron Technology, Inc., Storage Technology Corp., and TETRA
Technologies, Inc. In the case of ADT Ltd., the stock was sold with
a substantial gain following the proposed take-over of the company
by Western Resources, Inc.
<PAGE>
Global Opportunity Portfolio
Fiscal Year in Review
During the 12 months ended January 31, 1997, US equities were a
positive net contributor to overall Portfolio returns, as was the
case during the previous year. Particularly strong returns were
exhibited by the technology, financial services and consumer staple
commitments, which were well represented in the portfolio. While the
overall return on foreign equities lagged the United States by a
significant margin, the decision to underweight Japan and overweight
a number of markets in the Americas and Europe reduced the negative
impact of the foreign equity representation during the year.
Similarly, while bond returns were also well below those of US
equities, a number of markets represented in the portfolio during
most of the year, including Canada, the United Kingdom and Sweden,
made positive contributions to performance. The Portfolio's cash
position, which was relatively small during much of 1996, held down
returns to a much lesser extent than was the case during the 12
months ended January 31, 1996. For the year ended January 31, 1997,
the Portfolio's Class A, Class B, Class C and Class D Shares had
total returns of +12.68%, +11.67%, +11.61% and +12.56%,
respectively.
Investment Activities
During the three months ended January 31, 1997, we reduced the
commitment to North American bonds through the sale of the Canadian
bond position and a portion of the holdings in US Treasury
obligations. We increased the allocation to European bonds which we
regarded as having superior total return potential to that of North
American fixed-income obligations. In addition to enlarging the
position in German bonds, we initiated positions of Finnish and
French obligations and reestablished holdings in Italy and Spain. We
also expected the strength in the US dollar to continue against
European currencies as well as the Japanese yen. In view of this
outlook, we enlarged positions hedged back to US dollars to include
all the European bond and Japanese equity holdings and the majority
of the European stock commitments.
In the foreign equity sector, our country allocations did not
materially change during the three months ended January 31, 1997.
While Japan continued to represent the largest single country
position, the size of the commitment remained well below the
benchmark. Europe remained well-represented, given the relatively
large number of attractively valued companies in the European
markets. Similarly, significant positions were maintained in Latin
America and Canada, given the comparatively favorable outlooks for
the Canadian and Latin American economies and markets. Repre-
sentation in Latin America remained concentrated in Argentina,
Brazil and Mexico, which we believe continue to offer the best
potentials in the region. We continue to maintain a limited
commitment to the emerging markets of Asia.
<PAGE>
In the US equity market, we accepted profits in a number of
positions which had performed exceptionally well and no longer
seemed to offer above-average appreciation potential. Equities which
were liquidated on this basis included Microsoft Corp., The Coca-
Cola Co. and Procter & Gamble Company. However, the allocation of
assets to US stocks has not changed significantly in recent months.
The largest concentration of funds remains allocated to the
technology, financial services, energy, and health care sectors.
These areas are expected to continue to provide above-average
relative performance, given the potential for well-positioned
companies to exhibit favorable earnings patterns in upcoming
quarters.
As of January 31, 1997, the asset allocation for Global Opportunity
Portfolio was: foreign equities, 47% of net assets; US stock, 30%;
foreign bonds, 15%; US bonds, 2%; and cash reserves of 6%.
Growth Opportunity Portfolio
Fiscal Year in Review
Total returns of Growth Opportunity Portfolio's Class A, Class B,
Class C and Class D Shares were +17.90%, +16.80%, +16.70%, and
+17.80%, respectively, since inception (February 2, 1996) to January
31, 1997. Investment returns during the fiscal year were less than
the returns for the unmanaged S&P 500 Index and the Lipper Growth
Funds Average. The principal reason for the underperformance was our
cautious portfolio strategy. We had only modest investment
weightings in several strong sectors such as computer equipment,
semiconductor and oil service because we anticipated a slowdown in
the growth of consumer spending on consumer durable goods, and in
particular for desktop computers. While growth did slow in the
United States, accelerated growth in Asia and globally among
corporate customers more than offset the slower growth from US
consumers. Recent industry surveys support an outlook for an accel-
erated upgrade and expansion of desktop computer networks in 1997.
Consequently, we increased the Portfolio's weighting in technology
companies in January 1997.
The principal positive contributor to investment performance in the
fiscal year was a consistent overweighting of the pharmaceutical
industry. Another significant positive contributor was the heavy
portfolio weighting in the financial services, insurance and banking
sectors. In addition, investment holdings in The Gillette Company,
The Coca-Cola Company, and Procter & Gamble Company were important
contributors to the fiscal year investment returns.
<PAGE>
Investment Activities
For the quarter ended January 31, 1997, total returns for Merrill
Lynch Growth Opportunity Portfolio's Class A, Class B, Class C and
Class D Shares were +7.38%, +7.06%, +7.06% and +7.29%, respectively.
The Portfolio's weightings during January were increased in the
computer equipment, telecommunications equipment and oil service and
exploration equipment industries. Recent surveys of capital
investment intentions reflect the likelihood of an increase in
spending during 1997 on networked computer systems, advanced digital
wireless communication infrastructure and energy exploration
activities. The Portfolio's modest investment exposure to companies
in these sectors was a significant factor in the Portfolio
experiencing a total return less than the unmanaged S&P's 500 Index
during the January quarter. We continue to have a positive outlook
for the US equity market in early 1997. Real wages appear to be
growing at a reasonable rate, while productivity improvements
contain the overall rate of consumer price inflation at a fairly
constant modest rate. Real consumer spending rebounded in the fourth
quarter of 1996 and may continue in the +2% to +3% range, if
targeted middle-income tax cuts are enacted at the federal level
during the first half of 1997.
The ten largest industry sectors in the Portfolio at the end of the
January quarter were: pharmaceuticals, banking and financial
services, insurance, communication equipment, software--computer,
oil & services, energy, computers, financial services and cosmetics.
These industries represented 58.5% of the quarter-end net assets.
The top ten stock holdings were 32.4% of net assets.
We added eight companies to the Portfolio during the quarter. We
purchased shares of cisco Systems, Inc., the global leader in
network equipment and software for the Internet market and private
intranets of computer systems, because of the likelihood of a
continuation of a relatively high growth rate in earnings as
corporations increase the pace of spending on networked computer
systems. Hewlett-Packard Co. was added because recent surveys
reflect that the company should be a major beneficiary of corporate
spending on network computers along with Compaq Computer Corp. In
the communications equipment sector, we bought shares of Lucent
Technologies, Inc., Telefonaktiebolage LM Ericsson and FORE Systems,
Inc. In recent months, capital spending contracts were announced for
the installation of major new digital wireless communication systems
in the domestic market. In addition, both the long distance and
local exchange telephone companies are in the process of increasing
capital investment outlays for the latest communication switches and
related software which can efficiently carry not only voice and
data, but also video communications. These investments are needed to
compete cost effectively for the telecommunications business of
<PAGE>
corporations with expanding networks of desktop computers.
Honeywell, Inc. was added to the portfolio because of the attractive
valuation relative to an anticipated rise in the growth rate of
earnings from a multi-year upturn in capital investment in new
commercial aircraft and the upgrading of the avionics in older
aircrafts. We invested in Diamond Offshore Drilling, Inc. because of
the attractive valuation relative to an anticipated multi-year rise
in earnings, cash flow and rate of return as anticipated spending on
exploration for energy resources rises sharply. Shares of US
Bancorp, a leading regional bank holding company in the Northwest,
were purchased because of its attractive valuation relative to an
expected double-digit rate of growth in earnings and a rising rate
of return on equity.
Several companies were eliminated from the Portfolio during the
January quarter. We sold MCI Communications Corp. at a significant
capital gain as the stock's valuation became excessive following an
acquisition agreement with British Telecommunications PLC. Pharmacia
& Upjohn, Inc. was sold at a capital gain because of the high
valuation relative to our appraisal of the fundamental outlook, as
was SmithKline Beecham Corp. PLC.
Quality Bond Portfolio
Fiscal Year in Review
The acceleration of job creation, which became evident in February
1996, adversely impacted interest rates throughout the first half of
the year. By June, job growth averaged 233,000 jobs per month for
the first six months of 1996 compared with an average monthly gain
of only 144,000 during the same period in 1995. Combined with
surprising strength in the wage and salary index, this caused
concern that the favorable inflation climate may be drawing to a
close. The rise in bond prices, which occurred in 1995, began to
reverse in the first quarter of 1996. Bond prices fluctuated during
the spring and summer months in a swirl of speculation about the
course of inflation. This volatility was caused by the release of
economic data which seemed inconclusive with regard to future
economic growth prospects. Bond prices remained volatile until the
Federal Reserve Board's decision in late September not to raise
short-term interest rates. This was interpreted by investors as a
sign that the economy was slowing enough in the third quarter so
that inflation would not be a problem. Bond prices began to rise as
third-quarter data were released. However, Federal Reserve Board
Chairman Alan Greenspan's comment that there was an "irrational
exuberance" in US financial markets sent a shudder through the
investment system because it implied that the levels of both stock
and bond prices were not consistent with the economic data. Within
two weeks after his remarks, the stock market dropped over 200
points and there was a corresponding increase of 20 basis points in
the bellwether long-term Treasury bond.
<PAGE>
Release of fourth quarter GDP statistics showed a stronger than
expected increase of 4.7%. However, the same report showed how well-
behaved inflation was. The GDP price deflator rose only 1.4% for the
fourth quarter and helped spark a minor bond rally near the end of
January.
We began the fiscal year ended January 31, 1997 with an average
duration of 5.1 years, which was modestly shorter than the general
market index. We held 18.5% of the Portfolio's net assets in cash
because the Portfolio was in its inception stage and its small asset
base precluded large positions in any one security. By April, when
the yield on the bellwether long-term Treasury bond rose over 7%, we
shortened the duration to 4.3 years and raised the cash reserves
level to 23.8%. As the market improved in the late summer, cash was
reduced to 7.1% and the duration extended to 4.8 years. We held the
duration within a narrow range for the past three months and reduced
the cash position back to 5.9%. This conservative strategy resulted
in positive total returns for the Portfolio during the fiscal year.
US Government Securities Portfolio
Fiscal Year in Review
Although short-term interest rates remained relatively unchanged
during the Portfolio's fiscal year, longer-term interest rates rose
significantly. The last time the Federal Reserve Board changed
monetary policy was in January 1996 when the overnight bank lending
rate, better known as the Federal Funds rate, was cut to 5.25%. The
sentiment changed from an easing of interest rates to a tightening
of them. GDP, the total output of goods and services, showed on an
ongoing basis that the economy was not slowing but in fact growing,
and at a stronger-than-expected pace. The fear of monetary
tightening throughout the year caused intermediate-term and long-
term interest rates to rise significantly. Since a year ago, the two-
year, three-year and five-year Treasury note yields all rose 100
basis points (1.00%) or more. The rise in the two-year yield coupled
with no change in the Federal Funds rate level led to a dramatic
steepening from a once inverted part of the yield curve. The ten-
year note and thirty-year bond rose 93 basis points and 77 basis
points, respectively, for the year ended January 31, 1997.
The increase in the 10-year and 30-year benchmark yields greatly
dampened prepayment fears. Mortgage prepayments largely arise from
the exercising of the embedded option each homeowner has to
refinance an existing loan and replace it with a lower interest rate
one. Faster prepayments occur with decreasing interest rates and
shorten the lives of mortgage-backed securities (MBS), leaving the
investor with the prospect of buying new securities in a lower
interest rate environment. Because prepayments were not a problem
for MBS, the high yield was not offset by the effects of
prepayments. Additionally, without prepayment concerns, MBS price
performance was better than similar average life Treasury
securities, causing yield spreads to tighten during the January
quarter to 20-month lows.
<PAGE>
MBS performed impressively and reduced prepayment fears were not the
only variable assisting MBS. A significant pickup in Collaterized
Mortgage Obligations issuance, light selling by mortgage bankers and
increased demand for yield spread product all contributed to the
performance of MBS. For example, the total rates of return for 30-
year Government National Mortgage Association 7.50% and 6% were
+5.10% and +2.85%, respectively, for the year ended January 31,
1997. By comparison, five-year and ten-year Treasury notes which
have similar average lives returned +1.69% and -0.47%, respectively,
for the same 12-month period. The US Government Securities Portfolio
maintained an allocation of 80% in MBS throughout the fiscal year,
and the Portfolio's performance benefited from this allocation.
Additionally, the high coupon securities were seasoned, low balance
mortgages where prepayment activity is low, allowing for an
attractive yield. Their short duration also insulated price
movements during the rising interest rate environment. These two
things coupled to create an attractive total rate of return. As long
as interest rates remain in the current trading range, MBS should
continue to perform well.
In our view, there is no immediate need for the Federal Reserve
Board to raise interest rates. The core rate of the Consumer Price
Index rose 2.6% for all of 1996, matching the slowest pace of growth
since 1965. Labor costs were contained, with the employment cost
index rising just 2.9% from a year earlier. Fourth quarter 1996 GDP
revealed a 4.7% surge in economic growth, but was calmed by a modest
1.8% gain in the weighted price deflator and a temporary surge in
exports. In addition, consumer confidence in the US economy climbed
to its highest level in a decade. These releases reflect an economy
on a moderate growth path with low inflation. There will be a flurry
of economic releases in the upcoming months and the outcome of those
releases will suggest if and when a tightening of monetary policy is
necessary.
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
<PAGE>
(Kevin M. Rendino)
Kevin M. Rendino
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
Senior Portfolio Manager
US Government Securities Portfolio
March 14, 1997
<PAGE>
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).
<PAGE>
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent
Performance
Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
1/31/97 10/31/96 1/31/96 % Change % Change As of 1/31/97
<S> <C> <C> <C> <C> <C>
Fundamental Value Portfolio Class A Shares $13.58 $12.93 $11.67 +18.54%(1) + 6.99%(1) --
Fundamental Value Portfolio Class B Shares 13.39 12.70 11.55 +18.13(1) + 7.43(1) --
Fundamental Value Portfolio Class C Shares 13.39 12.70 11.55 +18.13(1) + 7.43(1) --
Fundamental Value Portfolio Class D Shares 13.54 12.89 11.65 +18.40(1) + 7.01(1) --
Global Opportunity Portfolio Class A Shares 11.93 11.42 10.82 +11.44(2) + 5.58(2) --
Global Opportunity Portfolio Class B Shares 11.86 11.27 10.76 +11.41(2) + 6.37(2) --
Global Opportunity Portfolio Class C Shares 11.84 11.27 10.75 +11.33(2) + 6.19(2) --
Global Opportunity Portfolio Class D Shares 11.92 11.39 10.80 +11.55(2) + 5.77(2) --
Growth Opportunity Portfolio Class A Shares 11.79 10.98 10.00++ +17.90++ + 7.38 --
Growth Opportunity Portfolio Class B Shares 11.68 10.91 10.00++ +16.80++ + 7.06 --
Growth Opportunity Portfolio Class C Shares 11.67 10.90 10.00++ +16.70++ + 7.06 --
Growth Opportunity Portfolio Class D Shares 11.78 10.98 10.00++ +17.80++ + 7.29 --
Quality Bond Portfolio Class A Shares 9.79 9.91 10.27 - 4.67 - 1.21 6.30%
Quality Bond Portfolio Class B Shares 9.79 9.90 10.27 - 4.67 - 1.11 5.81
Quality Bond Portfolio Class C Shares 9.79 9.90 10.27 - 4.67 - 1.11 5.88
Quality Bond Portfolio Class D Shares 9.79 9.90 10.27 - 4.67 - 1.11 6.28
US Government Securities Portfolio Class A Shares 10.20 10.29 10.48 - 2.62(3) - 0.83(3) 6.67
US Government Securities Portfolio Class B Shares 10.20 10.29 10.48 - 2.62(3) - 0.83(3) 6.21
US Government Securities Portfolio Class C Shares 10.19 10.29 10.47 - 2.63(3) - 0.92(3) 6.16
US Government Securities Portfolio Class D Shares 10.20 10.29 10.48 - 2.62(3) - 0.83(3) 6.44
Fundamental Value Portfolio Class A Shares--Total Return +23.20(4) +11.19(4)
Fundamental Value Portfolio Class B Shares--Total Return +21.79(5) +10.77(5)
Fundamental Value Portfolio Class C Shares--Total Return +21.82(6) +10.79(6)
Fundamental Value Portfolio Class D Shares--Total Return +22.82(7) +11.01(7)
Global Opportunity Portfolio Class A Shares--Total Return +12.68(8) + 6.76(8)
Global Opportunity Portfolio Class B Shares--Total Return +11.67(9) + 6.61(9)
Global Opportunity Portfolio Class C Shares--Total Return +11.61(10) + 6.46(10)
Global Opportunity Portfolio Class D Shares--Total Return +12.56(11) + 6.73(11)
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Recent
Performance
Results*
(concluded)
<CAPTION>
12 Month 3 Month
% Change % Change
<S> <C> <C>
Growth Opportunity Portfolio Class A Shares--Total Return +17.90%++ +7.38%
Growth Opportunity Portfolio Class B Shares--Total Return +16.80++ +7.06
Growth Opportunity Portfolio Class C Shares--Total Return +16.70++ +7.06
Growth Opportunity Portfolio Class D Shares--Total Return +17.80++ +7.29
Quality Bond Portfolio Class A Shares--Total Return + 2.51(12) +0.95(13)
Quality Bond Portfolio Class B Shares--Total Return + 1.62(14) +0.83(15)
Quality Bond Portfolio Class C Shares--Total Return + 1.55(16) +0.81(17)
Quality Bond Portfolio Class D Shares--Total Return + 2.25(18) +0.99(19)
US Government Securities Portfolio Class A Shares--Total Return + 4.76(20) +1.50(21)
US Government Securities Portfolio Class B Shares--Total Return + 3.90(22) +1.29(23)
US Government Securities Portfolio Class C Shares--Total Return + 3.83(24) +1.17(25)
US Government Securities Portfolio Class D Shares--Total Return + 4.49(26) +1.44(27)
<FN>
++Growth Opportunity Portfolio commenced operations on 2/02/96.
Investment results and net asset values are from 2/02/96.
*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 ordinary
income dividends.
(4)Percent change includes reinvestment of $0.530 per share ordinary
income dividends and $0.248 capital gains distributions.
(5)Percent change includes reinvestment of $0.415 per share ordinary
income dividends and $0.248 capital gains distributions.
(6)Percent change includes reinvestment of $0.417 per share ordinary
income dividends and $0.248 capital gains distributions.
(7)Percent change includes reinvestment of $0.503 per share ordinary
income dividends and $0.248 capital gains distributions.
<PAGE>
(8)Percent change includes reinvestment of $0.128 per share ordinary
income dividendsand $0.122 capital gains distributions.
(9)Percent change includes reinvestment of $0.027 per share ordinary
income dividends and $0.122 capital gains distributions.
(10)Percent change includes reinvestment of $0.030 per share
ordinary income dividends and $0.122 capital gains distributions.
(11)Percent change includes reinvestment of $0.105 per share
ordinary income dividends and $0.122 capital gains distributions.
(12)Percent change includes reinvestment of $0.720 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.222 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.633 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.199 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.626 per share
ordinary income dividends.
(17)Percent change includes reinvestment of $0.196 per share
ordinary income dividends.
(18)Percent change includes reinvestment of $0.695 per share
ordinary income dividends.
(19)Percent change includes reinvestment of $0.215 per share
ordinary income dividends.
(20)Percent change includes reinvestment of $0.753 per share
ordinary income dividends and $0.005 capital gains distributions.
(21)Percent change includes reinvestment of $0.245 per share
ordinary income dividends and $0.005 capital gains distributions.
(22)Percent change includes reinvestment of $0.667 per share
ordinary income dividends and $0.005 capital gains distributions.
(23)Percent change includes reinvestment of $0.222 per share
ordinary income dividends and $0.005 capital gains distributions.
(24)Percent change includes reinvestment of $0.660 per share
ordinary income dividends and $0.005 capital gains distributions.
(25)Percent change includes reinvestment of $0.220 per share
ordinary income dividends and $0.005 capital gains distributions.
(26)Percent change includes reinvestment of $0.727 per share
ordinary income dividends and $0.005 capital gains distributions.
(27)Percent change includes reinvestment of $0.238 per share
ordinary income dividends and $0.005 capital gains distributions.
</TABLE>
<PAGE>
Fundamental
Value Portfolio
Total Return
Based on a
$10,000
Investment
Line graphs depicting the growth of an investment in the Fund's Class A
Shares, Class B Shares, Class C Shares and Class D Shares compared to
growth of an investment in the S&P 500 Index. Beginning and ending values
are:
2/01/95** 1/97
Fundamental Value Portfolio++-- $ 9,475 $14,020
Class A Shares*
Fundamental Value Portfolio++-- $10,000 $14,181
Class B Shares*
S&P 500 Index++++-- $10,000 $17,515
2/01/95** 1/97
Fundamental Value Portfolio++-- $10,000 $14,484
Class C Shares*
Fundamental Value Portfolio++-- $ 9,475 $13,953
Class D Shares*
S&P 500 Index++++-- $10,000 $17,515
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++Fundamental Value Portfolio invests in equities, primarily common stocks
and, to a less extent, securities convertible into common stock, as
well as preferred stocks and non-convertible debt securities.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
<PAGE>
Fundamental
Value Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +19.10% +12.85%
Inception (2/01/95) to 12/31/96 +20.64 +17.28
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +17.86% +13.86%
Inception (2/01/95) to 12/31/96 +19.40 +18.06
[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 12/31/96 +17.89% +16.89%
Inception (2/01/95) to 12/31/96 +19.42 +19.42
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/96 +18.91% +12.67%
Inception (2/01/95) to 12/31/96 +20.43 +17.08
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
Global
Opportunity
Portfolio
Total Return
Based on a
$10,000
Investment
Line graphs depicting the growth of an investment in the Fund's Class A
Shares, Class B Shares, Class C Shares and Class D Shares compared to
growth of an investment in the Morgan Stanley Capital International
World Index and the Salomon Brothers World Government Bond Index.
Beginning and ending values are:
2/01/95** 1/97
Global Opportunity Portfolio++-- $ 9,475 $11,867
Class A Shares*
Global Opportunity Portfolio++-- $10,000 $11,971
Class B Shares*
Morgan Stanley Capital International-- $10,000 $14,076
World Index++++
Salomon Brothers World Government-- $10,000 $11,758
Bond Index++++++
<PAGE>
2/01/95** 1/97
Global Opportunity Portfolio++-- $10,000 $12,256
Class C Shares*
Global Opportunity Portfolio++-- $ 9,475 $11,817
Class D Shares*
Morgan Stanley Capital International-- $10,000 $14,076
World Index++++
Salomon Brothers World Government-- $10,000 $11,758
Bond Index++++++
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++Global Opportunity Portfolio invests in a portfolio of US and foreign
equity, debt and money market securities.
++++This unmanaged market capitalization-weighted Index is comprised
of a representative sampling of stocks of large-, medium-, and
small-capitalization companies in 22 countries, including the United
States.
++++++This unmanaged market capitalization-weighted Index tracks the
performance of the government bond markets of Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, the
Netherlands, Spain, Sweden, the United Kingdom and the United States.
Past performance is not predictive of future performance.
Global
Opportunity Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
<PAGE>
Year Ended 12/31/96 +11.59% +5.73%
Inception (2/01/95) to 12/31/96 +11.05 +7.96
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +10.48% +6.48%
Inception (2/01/95) to 12/31/96 + 9.86 +8.41
[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 12/31/96 +10.52% +9.52%
Inception (2/01/95) to 12/31/96 + 9.84 +9.84
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/96 +11.48% +5.62%
Inception (2/01/95) to 12/31/96 +10.81 +7.73
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
Growth
Opportunity
Portfolio
Total Return
Based on a
$10,000
Investment
Line graphs depicting the growth of an investment in the Fund's Class A
Shares, Class B Shares, Class C Shares and Class D Shares compared to
growth of an investment in the Lipper Growth Fund Index. Beginning and
ending values are:
2/02/96** 1/97
Growth Opportunity Portfolio++-- $ 9,475 $11,171
Class A Shares*
Growth Opportunity Portfolio++-- $10,000 $11,280
Class B Shares*
Lipper Growth Fund Index++++-- $10,000 $12,019
2/02/96** 1/97
Growth Opportunity Portfolio++-- $10,000 $11,570
Class C Shares*
Growth Opportunity Portfolio++-- $ 9,475 $11,162
Class D Shares*
Lipper Growth Fund Index ++++-- $10,000 $12,019
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++Growth Opportunity Portfolio invests in a portfolio of equity securities,
placing particular emphasis on large-capitalization companies that are
anticipated to exhibit above-average growth rate in earnings.
++++Lipper Growth Fund Index is an equally weighted index of the largest
mutual funds which normally invest in companies whose long-term earnings
are expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged stock indexes. The index is adjusted
for reinvestment of capital gains distributions and income dividends.
Past performance is not predictive of future performance.
<PAGE>
Growth
Opportunity
Portfolio
Aggregate
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (2/02/96) to 12/31/96 +12.40% +6.50%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (2/02/96) to 12/31/96 +11.50% +7.50%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (2/02/96) to 12/31/96 +11.40% +10.40%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (2/02/96) to 12/31/96 +12.40% +6.50%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
Quality Bond
Portfolio
Total Return
Based on a
$10,000
Investment
Line graphs depicting the growth of an investment in the Fund's Class A
Shares, Class B Shares, Class C Shares and Class D Shares compared to
growth of an investment in the ML COAO Corporate Master Bond Index.
Beginning and ending values are:
2/01/95** 1/97
Quality Bond Portfolio++-- $ 9,600 $10,752
Class A Shares*
Quality Bond Portfolio++-- $10,000 $10,717
Class B Shares*
ML COAO Corporate Master++++-- $10,000 $12,350
Bond Index
2/01/95** 1/97
<PAGE>
Quality Bond Portfolio++-- $10,000 $10,995
Class C Shares*
Quality Bond Portfolio++-- $ 9,600 $10,698
Class D Shares*
ML COAO Corporate Master++++-- $10,000 $12,350
Bond Index
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++Quality Bond Portfolio invests in a diversified portfolio of debt
obligations, including corporate bonds and notes, convertible securities,
preferred stocks and government obligations. The Portfolio will invest
primarily in securities rated in the top three rating categories
(A or better) of a nationally recognized rating agency or in securities
with similar credit characteristics.
++++This unmanaged Index is comprised of all investment-grade corporate
bonds rated BB3 or higher, of all maturities.
Past performance is not predictive of future performance.
Quality Bond
Portfolio
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +2.73% - 1.38%
Inception (2/01/95) to 12/31/96 +5.99 +3.75
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
<PAGE>
Year Ended 12/31/96 +1.95% - 1.88%
Inception (2/01/95) to 12/31/96 +5.09 +3.61
[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 12/31/96 +1.88% +0.92%
Inception (2/01/95) to 12/31/96 +5.02 +5.02
[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 12/31/96 +2.58% - 1.52%
Inception (2/01/95) to 12/31/96 +5.73 +3.50
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
US Government
Securities
Portfolio
Total Return
Based on a
$10,000
Investment
<PAGE>
Line graphs depicting the growth of an investment in the Fund's Class A
Shares, Class B Shares, Class C Shares and Class D Shares compared to
growth of an investment in the Salomon Brothers Mortgage Index.
Beginning and ending values are:
2/01/95** 1/97
US Government Securities Portfolio++-- $ 9,600 $11,613
Class A Shares*
US Government Securities Portfolio++-- $10,000 $11,599
Class B Shares*
Salomon Brothers Mortgage Index++++-- $10,000 $12,136
2/01/95** 1/97
US Government Securities Portfolio++-- $10,000 $11,874
Class C Shares*
US Government Securities Portfolio++-- $10,000 $11,549
Class D Shares*
Salomon Brothers Mortgage Index++++-- $10,000 $12,136
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++US Government Securities Portfolio invests in marketable securities
issued or guaranteed by the US Government, by various agencies of
the US Government and by various instrumentalities which have been
established or sponsored by the US Government.
++++This unmanaged Index reflects the performance of a capital
market weighting of the outstanding agency-issued mortgage-backed
securities.
Past performance is not predictive of future performance.
US Government
Securities
Portfolio
<PAGE>
Average Annual
Total Returns
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 + 5.44% +1.22%
Inception (2/01/95) to 12/31/96 +10.08 +7.76
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +4.57% +0.65%
Inception (2/01/95) to 12/31/96 +9.18 +7.72
[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 12/31/96 +4.40% +3.43%
Inception (2/01/95) to 12/31/96 +9.06 +9.06
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/96 +5.07% +0.87%
Inception (2/01/95) to 12/31/96 +9.78 +7.46
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<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. (ADR)* $ 862,750 $ 1,254,375 2.3%
Total Investments in Latin America 862,750 1,254,375 2.3
MIDDLE
EAST
Israel Computer Services 68,500 Scitex Corp. Ltd. 762,904 736,375 1.4
Total Investments in the Middle East 762,904 736,375 1.4
NORTH
AMERICA
United States Airlines 80,000 ++Mesa Air Group, Inc. 696,742 520,000 1.0
Athletic Footwear 17,500 Reebok International Ltd. 507,324 831,250 1.5
Auto--Related 60,900 ++National Auto Credit, Inc. 623,556 662,288 1.2
Automotive 35,000 Ford Motor Co. 1,078,176 1,124,375 2.1
16,500 General Motors Corp. 800,012 973,500 1.8
----------- ----------- ------
1,878,188 2,097,875 3.9
Banking 12,500 Bankers Trust New York Corp. 796,351 1,062,500 2.0
65,000 ++Hibernia Corp. (Class A) 751,258 861,250 1.6
----------- ----------- ------
1,547,609 1,923,750 3.6
Beverage & 20,000 Seagram Company Ltd. (The) 679,112 792,500 1.5
Entertainment
Chemicals 1,500 Great Lakes Chemical Corp. 70,098 64,688 0.1
30,000 ++Millennium Chemicals Inc. 613,498 596,250 1.1
----------- ----------- ------
683,596 660,938 1.2
<PAGE>
Entertainment 30,000 ++Harrah's Entertainment, Inc. 556,740 585,000 1.1
Environmental 95,600 ++Allwaste Inc. 526,415 513,850 1.0
Services
Financial Services 8,000 Student Loan Marketing Association 491,605 871,000 1.6
Hardware Products 20,000 Black & Decker Corp. 628,132 670,000 1.2
Health Care 37,500 ++Humana, Inc. 705,910 712,500 1.3
Home Builders 40,000 ++Beazer Homes USA, Inc. 659,255 645,000 1.2
Hospital Management 90,000 ++Transitional Hospitals Corp. 792,131 821,250 1.5
Hotels 12,500 ++ITT Corp. 550,401 714,063 1.3
Information 50,000 ++Apple Computer, Inc. 1,142,450 825,000 1.6
Processing 9,000 International Business Machines Corp. 968,223 1,415,250 2.6
82,700 ++Tandem Computers, Inc. 880,564 1,147,462 2.1
----------- ----------- ------
2,991,237 3,387,712 6.3
Machinery 32,500 ITT Industries Inc. 752,558 820,625 1.5
Medical Services 38,800 ++Pharmaceutical Product Development,
Inc. (a) 581,693 1,105,800 2.0
Metals--Non-Ferrous 40,000 ASARCO Inc. 1,084,257 1,100,000 2.0
12,500 Phelps Dodge Corp. 741,636 873,437 1.6
----------- ----------- ------
1,825,893 1,973,437 3.6
Oil--Domestic 49,900 ++American Exploration Co. 556,170 736,025 1.4
45,000 Occidental Petroleum Corp. 1,006,450 1,147,500 2.1
----------- ----------- ------
1,562,620 1,883,525 3.5
Oil Refiners 70,000 Total Petroleum (North America) Ltd. 783,735 743,750 1.4
Paper & Forest 25,000 International Paper Co. 967,851 1,021,875 1.9
Products 30,000 Louisiana-Pacific Corp. 765,796 622,500 1.1
----------- ----------- ------
1,733,647 1,644,375 3.0
Pharmaceuticals 7,000 Bristol-Myers Squibb Co. 513,760 889,000 1.6
<PAGE>
Photography 9,000 Eastman Kodak Co. 638,640 780,750 1.4
Publishing/ 19,800 Dow Jones & Company, Inc. 714,018 784,575 1.5
Newspapers
Real Estate 30,000 Evans Withycombe Residential, Inc. 609,085 630,000 1.2
Investment Trusts
Retail 160,000 ++Charming Shoppes, Inc. 672,371 750,000 1.4
30,000 Dillard Department Stores Inc. 912,709 896,250 1.6
100,100 Hechinger Co. (Class A) 402,680 197,072 0.4
80,000 ++Kmart Corporation 846,317 890,000 1.6
50,000 ++Woolworth Corp. 634,936 1,018,750 1.9
----------- ----------- ------
3,469,013 3,752,072 6.9
Savings & Loans 80,000 Greater New York Savings Bank 794,627 1,130,000 2.1
27,200 ++PFF Bancorp Inc. 306,550 397,800 0.7
----------- ----------- ------
1,101,177 1,527,800 2.8
Semiconductors 20,000 ++Advanced Micro Devices Inc. 237,128 700,000 1.3
76,400 ++Integrated Device Technology, Inc. 879,634 792,650 1.4
30,900 ++National Semiconductor Corp. 545,679 857,475 1.6
15,000 Texas Instruments, Inc. 727,692 1,175,625 2.2
----------- ----------- ------
2,390,133 3,525,750 6.5
Software--Computer 68,600 ++Mentor Graphics Corporation 705,318 703,150 1.3
Steel 41,800 USX-US Steel Group, Inc. 1,248,759 1,321,925 2.4
85,000 ++WHX Corp. 877,229 733,125 1.4
----------- ----------- ------
2,125,988 2,055,050 3.8
Technology 110,000 ++Computervision Corp. 1,008,276 825,000 1.5
69,300 ++Exabyte Corp. 891,920 736,312 1.3
86,000 ++Micronics Computers, Inc. 285,678 198,875 0.4
----------- ----------- ------
2,185,874 1,760,187 3.2
Telecommunications 17,500 GTE Corp. 746,200 822,500 1.5
50,000 ++U S West Media Group 869,720 931,250 1.7
----------- ----------- ------
1,615,920 1,753,750 3.2
Total Investments in North America 37,827,025 42,742,572 78.8
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Fundamental Value Portfolio (concluded)
WESTERN Shares Value Percent of
EUROPE Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Kingdom Conglomerates 80,800 Hanson PLC (ADR)* $ 679,409 $ 606,000 1.1%
Total Investments in Western Europe 679,409 606,000 1.1
SHORT-TERM Face
SECURITIES Amount Issue
US Government Federal Home Loan Bank:
Agency US$ 1,000,000 5.21% due 3/11/1997 994,500 994,500 1.8
Obligations** 1,890,000 5.21% due 3/17/1997 1,877,965 1,877,965 3.5
2,000,000 Federal Home Loan Mortgage Corp.,
5.22% due 3/25/1997 1,984,920 1,984,920 3.7
Federal National Mortgage Association:
1,000,000 5.20% due 2/24/1997 996,678 996,678 1.8
3,200,000 5.19% due 3/07/1997 3,184,315 3,184,315 5.9
Total Investments in Short-Term
Securities 9,038,378 9,038,378 16.7
Total Investments $49,170,466 54,377,700 100.3
===========
Liabilities in Excess of Other Assets (139,003) (0.3)
=========== ======
Net Assets $54,238,697 100.0%
=========== ======
<FN>
*American Depositary Receipts (ADR).
**Certain US Government Agency Obligations are traded on a discount
basis; the interest rates shown are the rates paid at the time of
purchase by the Portfolio.
++Non-income producing security.
(a)Applied Bioscience International Inc. was acquired by
Pharmaceutical Product Development, Inc.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<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> <C> <S> <C> <C> <C>
Denmark Dkr 5,000,000 Denmark Government Bonds, 8%
due 3/15/2006 $ 916,833 $ 882,136 2.0%
Finland Fim 2,000,000 Finnish Government Bonds, 7.25%
due 4/18/2006 451,354 442,351 1.0
France Frf 1,600,000 French Government OATS, 5.50%
due 4/25/2004 301,488 294,712 0.7
3,000,000 French Treasury Bill (BTAN), 5.50%
due 10/12/2001 584,058 565,063 1.3
----------- ----------- ------
885,546 859,775 2.0
Germany Bundesrepublik Deutschland:
DM 735,000 7.125% due 12/20/2002 513,394 496,805 1.1
850,000 6.50% due 10/14/2005 547,951 548,593 1.3
800,000 Treuhandanstalt, 6.875% due
6/11/2003 532,016 533,366 1.2
----------- ----------- ------
1,593,361 1,578,764 3.6
Italy Lit 1,655,000,000 Buoni Poliennali del Tesoro (Italian
Government Bonds), 8.50% due 1/01/2004 1,171,703 1,108,861 2.5
Spain Pta 80,000,000 Bonos del Estado (Spanish Government
Bonds), 7.90% due 2/28/2002 648,305 624,500 1.4
Sweden Government of Sweden:
Skr 2,000,000 10.25% due 5/05/2000 336,811 317,001 0.7
6,400,000 8% due 8/15/2007 1,004,679 955,422 2.2
----------- ----------- ------
1,341,490 1,272,423 2.9
Total Investments in Foreign
Government Obligations 7,008,592 6,768,810 15.4
US Government Obligations
<PAGE>
United States US Treasury Notes:
US$ 500,000 5% due 1/31/1998 495,586 496,795 1.1
500,000 6.25% due 4/30/2001 502,773 500,155 1.2
Total Investments in US Government
Obligations 998,359 996,950 2.3
Total Investments in Foreign &
US Government Obligations 8,006,951 7,765,760 17.7
<CAPTION>
Shares
Industries Held US Stocks
<S> <S> <C> <S> <C> <C> <C>
United States Aerospace & Defense 3,500 AlliedSignal, Inc. 253,009 245,875 0.6
3,000 Northrop Grumman Corp. 197,765 234,375 0.5
3,000 United Technologies Corporation 110,912 209,250 0.5
----------- ----------- ------
561,686 689,500 1.6
Automobile Parts 7,000 ++Lear Corporation 234,500 261,625 0.6
Automobiles 4,200 General Motors Corp. 233,197 247,800 0.6
Banking 7,700 The Bank of New York Company, Inc. 192,063 282,013 0.6
2,400 BankAmerica Corp. 248,481 267,900 0.6
2,500 Citicorp 198,914 290,938 0.7
----------- ----------- ------
639,458 840,851 1.9
</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 States Building & 5,500 Oakwood Homes Corporation $ 124,764 $ 112,750 0.3%
(concluded) Construction
Chemicals 3,000 ++FMC Corporation 212,542 210,375 0.5
Computer Sales 1,700 International Business Machines Corp. 186,823 267,325 0.6
Computer Services 3,800 ++cisco Systems, Inc. 169,246 264,575 0.6
Computer Software 5,900 ++BMC Software, Inc. 220,226 255,175 0.6
5,175 ++Oracle Corp. (a) 167,872 200,531 0.4
----------- ----------- ------
388,098 455,706 1.0
<PAGE>
Computer Technology 5,200 ++Gulfstream Aerospace Corporation 128,409 120,250 0.3
Computers 7,400 ++Cabletron Systems, Inc. 255,712 257,150 0.6
3,800 ++Compaq Computer Corp. 281,803 330,125 0.7
----------- ----------- ------
537,515 587,275 1.3
Diversified 6,500 Corning, Inc. 169,837 231,563 0.5
Drugs 3,500 ++Centocor, Inc. 127,149 133,438 0.3
Electrical Equipment 1,900 General Electric Company PLC 150,368 195,700 0.5
Energy 14,100 Edison International, Inc. 269,839 301,388 0.7
Engineering & 5,500 Foster Wheeler Corporation 230,178 212,438 0.5
Construction
Finance 5,000 Countrywide Credit Industries, Inc. 151,815 149,375 0.3
Financial Services 4,950 American Express Company 231,481 308,756 0.7
6,600 First Data Corp. 234,476 237,600 0.5
----------- ----------- ------
465,957 546,356 1.2
Foods 6,800 H.J. Heinz Company 223,452 273,700 0.6
Hardware Products 2,200 Black & Decker Corp. 74,735 73,700 0.2
Hospital Management 8,400 ++Health Management Associates, Inc.
(Class A) 189,374 232,050 0.5
Hospital Supplies 4,700 Abbott Laboratories 190,749 255,563 0.6
Insurance 2,050 Aetna Inc. (c) 156,273 161,950 0.4
4,500 Allstate Corp. 193,528 295,875 0.7
5,600 Travelers Group Inc. 294,513 293,300 0.7
3,600 UNUM Corporation 229,970 272,250 0.6
----------- ----------- ------
874,284 1,023,375 2.4
Leisure & Tourism 9,400 Brunswick Corporation 233,238 236,175 0.5
9,300 Carnival Corporation (Class A) 266,884 341,775 0.8
5,221 ++Viacom, Inc. (Class B) 191,700 178,819 0.4
----------- ----------- ------
691,822 756,769 1.7
<PAGE>
Machinery 4,000 ++American Standard Companies, Inc. 130,473 162,500 0.4
Manufacturing 5,400 Fisher Scientific International Inc. 170,672 236,925 0.5
Natural Gas 5,000 El Paso Natural Gas Co. 251,413 269,375 0.6
5,600 Enron Corp. 213,414 231,000 0.5
3,100 IMC Global, Inc. 120,164 118,188 0.3
----------- ----------- ------
584,991 618,563 1.4
Oil Service 7,700 Dresser Industries, Inc. 162,474 260,838 0.6
2,100 Schlumberger Ltd. 132,364 233,363 0.5
----------- ----------- ------
294,838 494,201 1.1
Paper 2,600 Kimberly-Clark Corp. 199,836 253,500 0.6
Petroleum 4,500 Pennzoil Company 180,578 280,688 0.7
6,400 Unocal Corp. 215,286 269,600 0.6
----------- ----------- ------
395,864 550,288 1.3
Pharmaceuticals 4,600 American Home Products Corporation 270,780 291,525 0.7
3,200 Merck & Co., Inc. 194,992 290,400 0.6
----------- ----------- ------
465,772 581,925 1.3
Railroads 2,500 Burlington Northern Santa Fe 202,835 218,750 0.5
Real Estate 5,400 Prentiss Properties Trust 110,372 145,125 0.3
Investment Trust
Retail--Drug Stores 6,455 Rite Aid Corporation 210,038 258,200 0.6
Retail Trade 4,400 Sears, Roebuck & Co. 191,869 211,200 0.5
Steel 1,000 AK Steel Holding Corp. 38,999 40,250 0.1
Telecommunications 9,200 ++AirTouch Communications, Inc. 263,399 238,050 0.5
3,600 Bell Atlantic Corporation 205,486 242,100 0.6
2,053 TCI Pacific Communications
(Convertible Preferred) 192,635 190,929 0.4
----------- ----------- ------
661,520 671,079 1.5
Tobacco 1,700 Philip Morris Companies, Inc. 163,704 202,087 0.5
Total Investments in US Stocks 11,047,580 13,088,040 29.9
Foreign Stocks
<PAGE>
Argentina Banking 17,707 Banco de Galicia y Buenos Aires
S.A. (ADR)* 298,216 431,608 1.0
15,237 Banco Frances del Rio de la Plata
S.A. (ADR)* 294,143 457,110 1.0
----------- ----------- ------
592,359 888,718 2.0
Petroleum 15,200 Yacimientos Petroliferos Fiscales
S.A. (ADR)* 315,268 423,700 1.0
Total Stocks in Argentina 907,627 1,312,418 3.0
Brazil Beverages 640,000 Companhia Cervejaria Brahma S.A.
PN (Preferred) 355,180 389,326 0.9
Oil--Related 2,500,000 Petroleo Brasileiro S.A. (Petrobras)
(Preferred) 296,363 480,631 1.1
Telecommunications 4,600 Telecomunicacoes Brasileiras S.A.--
Telebras PN (ADR)* 243,225 401,350 0.9
Total Stocks in Brazil 894,768 1,271,307 2.9
Canada Automotive Parts 7,300 Magna International, Inc. (Class A) 335,467 406,062 0.9
Conglomerates 15,800 Canadian Pacific, Ltd. 267,558 428,575 1.0
Entertainment 6,000 ++Imax Corporation 189,475 183,000 0.4
Fertilizers 5,300 Potash Corp. of Saskatchewan, Inc. 358,645 445,862 1.0
Total Stocks in Canada 1,151,145 1,463,499 3.3
</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>
Finland Paper & Forest 18,500 ++UPM-Kymmene Corp. (b) $ 377,041 $ 361,957 0.8%
Products
Telecommunications & 7,000 Nokia Corp. AB (ADR)* 255,343 468,125 1.1
Equipment
Transportation 9,000 Finnlines OY 167,834 224,949 0.5
Total Stocks in Finland 800,218 1,055,031 2.4
<PAGE>
France Insurance 10,600 Scor S.A. 409,263 381,447 0.9
Semi-Conductor 7,500 ++SGS-Thompson Microelectronics N.V.
Capital Equipment (NY Registered) 274,852 530,625 1.2
Steel 25,900 Usinor-Sacilor S.A. 408,710 368,127 0.8
Tires 7,200 Compagnie Generale des Establissement
Michelin S.A. (Class B) 328,953 412,861 1.0
Total Stocks in France 1,421,778 1,693,060 3.9
Germany Apparel 2,100 ++Puma AG 68,994 65,248 0.2
Chemicals 600 ++Henkel KGaA 26,670 29,520 0.1
5,400 ++Henkel KGaA (Preferred) 229,478 274,252 0.6
----------- ----------- ------
256,148 303,772 0.7
Electronics 7,950 Siemens AG 401,514 389,929 0.9
Machinery & 950 Mannesmann AG 312,291 367,660 0.8
Equipment
Total Stocks in Germany 1,038,947 1,126,609 2.6
Hong Kong Banking 20,000 HSBC Holdings PLC 312,430 463,315 1.1
Telecommunications 19,000 Hong Kong Telecommunications Ltd.
(ADR)* 352,215 327,750 0.7
Total Stocks in Hong Kong 664,645 791,065 1.8
Indonesia Telecommunications 11,000 P.T. Indonesian Satellite Corp. (ADR)* 367,699 309,375 0.7
Total Stocks In Indonesia 367,699 309,375 0.7
Italy Machinery 71,000 Danieli & Co. 266,366 300,220 0.7
Telecommunications 88,600 Societa Finanziara Telefonica S.p.A.
(STET) 253,451 437,310 1.0
Total Stocks in Italy 519,817 737,530 1.7
<PAGE>
Japan Building & 34,000 Maeda Corp. 357,334 240,132 0.6
Construction 40,000 Okumura Corp. 367,731 216,172 0.5
----------- ----------- ------
725,065 456,304 1.1
Capital Goods 44,000 Mitsubishi Heavy Industries, Ltd. 337,710 316,931 0.7
Consumer--Electronics 6,000 Rohm Company Ltd. 331,262 393,564 0.9
Electrical Equipment 64,000 Mitsubishi Electric Corp. 448,473 364,884 0.8
Electronics 17,000 Canon Inc. 306,699 360,479 0.8
20,000 Matsushita Electric Industrial Co.,
Ltd. 319,779 301,980 0.7
----------- ----------- ------
626,478 662,459 1.5
Financial Services 22,000 Nomura Securities Co., Ltd. 425,585 281,353 0.7
Insurance 40,000 Tokio Marine & Fire Insurance Co., Ltd. 442,529 363,036 0.8
Pharmaceuticals 19,000 Eisai Co., Ltd. 353,439 366,832 0.8
Textiles 60,000 Toray Industries Inc. 385,098 341,584 0.8
Tires & Rubber 21,000 Bridgestone Corp. 364,639 360,396 0.8
Warehouse & Storage 36,000 Mitsui-Soko Co., Ltd. 307,384 198,416 0.5
Total Stocks in Japan 4,747,662 4,105,759 9.4
Mexico Beverages 8,000 Panamerican Beverages, Inc. (Class A) 327,109 419,000 1.0
Conglomerates 12,800 Grupo Carso, S.A. de C.V. (ADR)* 203,726 155,200 0.3
Multi-Industry 178 Grupo Financiero Inbursa, S.A. de
C.V. (ADR)* 3,584 3,115 0.0
Paper & Forest 15,300 Kimberly-Clark de Mexico, S.A. de C.V 272,751 317,085 0.7
Producers
Telecommunications 12,800 ++Global Telecommunications Solutions,
Inc. (ADR)* 60,800 73,600 0.2
Total Stocks in Mexico 867,970 968,000 2.2
Netherlands Banking 5,400 ABN AMRO Holding N.V. 302,413 355,441 0.8
Total Stocks in the Netherlands 302,413 355,441 0.8
Norway Transportation 42,089 Color Line ASA 164,462 223,602 0.5
Services
Total Stocks in Norway 164,462 223,602 0.5
<PAGE>
Philippines Beverages 82,000 San Miguel Corp. (Class B) 272,811 330,243 0.7
Total Stocks in the Philippines 272,811 330,243 0.7
South Korea Engineering & 4,900 ++Hyundai Engineering & Construction 63,847 23,275 0.0
Construction Co., Ltd. (GDR)**(d)
Total Stocks in South Korea 63,847 23,275 0.0
Spain Petroleum 9,400 Repsol S.A. (ADR)* 308,300 372,475 0.9
Total Stocks in Spain 308,300 372,475 0.9
Sweden Banking 16,200 Sparbanken Sverige AB (Class A) 207,538 257,292 0.6
Investment 26,300 Bure Investment AB 243,251 385,013 0.9
Management
Total Stocks in Sweden 450,789 642,305 1.5
Switzerland Electrical Equipment 285 BBC Brown Boveri & Cie (Bearer) 304,247 364,512 0.8
Pharmaceuticals 6,000 ++Novartis AG (ADR)* (e) 285,354 341,250 0.8
Total Stocks in Switzerland 589,601 705,762 1.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Global Opportunity Portfolio (concluded)
Shares Value Percent of
COUNTRY Industries Held Foreign Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Kingdom Banking 29,000 National Westminster Bank PLC $ 309,851 $ 358,535 0.8%
Beverages 46,300 Grand Metropolitan PLC 324,693 344,639 0.8
Chemicals 7,100 Imperial Chemical Industries PLC 91,648 85,845 0.2
7,500 Imperial Chemical Industries PLC (ADR)* 389,042 368,437 0.8
----------- ----------- ------
480,690 454,282 1.0
Electrical Equipment 58,800 General Electric Co. PLC (Ordinary) 316,394 367,485 0.9
<PAGE>
Pharmaceuticals 24,500 Glaxo Wellcome PLC 340,903 392,416 0.9
Retail 37,000 Boots Company PLC 356,406 392,813 0.9
Steel 134,000 British Steel PLC 358,843 321,029 0.7
Telecommunications 94,000 Vodafone Group PLC 329,936 406,714 0.9
Total Stocks in the United Kingdom 2,817,716 3,037,913 6.9
Total Investments in Foreign Stocks 18,352,215 20,524,669 46.8
Total Investments in US & Foreign
Stocks 29,399,795 33,612,709 76.7
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
<S> <S> <C> <S> <C> <C> <C>
Commercial US$1,516,000 General Electric Capital Corp.,
Paper*** 5.58% due 2/03/1997 1,515,530 1,515,530 3.4
Total Investments in Short-Term
Securities 1,515,530 1,515,530 3.4
Total Investments $38,922,276 42,893,999 97.8
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 656,544 1.5
Other Assets Less Liabilities 302,116 0.7
----------- ------
Net Assets $43,852,659 100.0%
=========== ======
<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.
(a)Name changed from Oracle Systems Corp.
(b)Name changed as a result of the merger of Kymmene Corporation and
Repola Ltd.
(c)Name changed from Aetna Life & Casualty Co.
(d)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(e)Name changed from Sandoz AG.
++Non-income producing security.
++++Forward foreign exchange contracts as of January 31, 1997 were
as follows:
<PAGE>
<CAPTION>
Foreign Expiration Unrealized
Currency Sold Date Appreciation
<S> <C> <S> <C>
Chf 450,000 February 1997 $ 10,933
DM 14,720,469 February 1997 201,822
Frf 10,575,000 February 1997 65,505
Pound 1,600,000 February 1997 144,461
Sterling
Pta 86,432,000 February 1997 28,355
YEN 508,000,000 February 1997 205,468
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$19,262,633) $656,544
========
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 3,400 Interpublic Group of Companies, Inc. $ 153,631 $ 167,875 1.1%
Banking & Financial 13,000 H.F. Ahmanson & Company 421,546 487,500 3.2
3,000 State Street Boston Corp. 164,596 219,375 1.4
3,000 US Bancorp 129,706 136,500 0.9
1,200 Wells Fargo & Co. 312,573 365,700 2.4
----------- ----------- ------
1,028,421 1,209,075 7.9
Beverages 9,000 The Coca-Cola Company 424,084 520,875 3.4
Communication Equipment 2,000 ++cisco Systems, Inc. 147,250 139,250 0.9
3,000 ++FORE Systems, Inc. 89,250 87,375 0.6
8,000 Lucent Technologies, Inc. 420,273 434,000 2.8
5,000 Telefonaktiebolaget LM Ericsson (ADR)* 168,585 168,125 1.1
----------- ----------- ------
825,358 828,750 5.4
Computers 3,575 ++Compaq Computer Corp. 249,445 310,578 2.0
7,500 Hewlett-Packard Co. 408,847 394,688 2.6
----------- ----------- ------
658,292 705,266 4.6
<PAGE>
Cosmetics 7,000 Gillette Company (The) 459,160 570,500 3.7
100 International Flavors & Fragrances Inc. 4,970 4,438 0.0
----------- ----------- ------
464,130 574,938 3.7
Electrical Equipment 100 Emerson Electric Company 8,482 9,875 0.1
4,000 General Electric Co. 338,764 412,000 2.7
2,000 Honeywell, Inc. 144,477 144,250 0.9
----------- ----------- ------
491,723 566,125 3.7
Electronics 2,500 Intel Corp. 321,227 405,313 2.6
Energy 7,000 El Paso Natural Gas Co. 328,755 377,125 2.5
8,000 Enron Corp. 344,341 330,000 2.2
----------- ----------- ------
673,096 707,125 4.7
Entertainment 6,400 ++Viacom, Inc. (Class A) 241,568 217,600 1.4
2,000 Walt Disney Co. 121,933 146,500 1.0
----------- ----------- ------
363,501 364,100 2.4
Financial Services 13,500 Federal National Mortgage Association 451,454 533,250 3.5
3,000 The Travelers Group, Inc. 107,348 157,125 1.0
----------- ----------- ------
558,802 690,375 4.5
Food 1,500 ConAgra, Inc. 70,590 75,750 0.5
5,000 Nabisco Holdings Corporation (Class A) 184,143 191,250 1.3
2,000 Sara Lee Corp. 64,076 79,000 0.5
100 Wrigley (Wm.) Jr. Co. 5,920 5,813 0.0
----------- ----------- ------
324,729 351,813 2.3
</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> <S> <C> <S> <C> <C> <C>
Food Merchandising 4,000 Albertson's, Inc. $ 159,212 $ 140,000 0.9%
4,000 ++Meyer (Fred), Inc. 138,367 138,500 0.9
----------- ----------- ------
297,579 278,500 1.8
<PAGE>
Hotels 1,000 Marriott International, Inc. 46,921 53,125 0.3
Household Products 500 Colgate-Palmolive Co. 37,260 48,375 0.3
2,500 Kimberly-Clark Corp. 191,350 243,750 1.6
2,000 Procter & Gamble Company 172,295 231,000 1.5
----------- ----------- ------
400,905 523,125 3.4
Information Processing 1,000 Electronic Data Systems Corp. (b) 54,463 46,000 0.3
10,000 First Data Corp. 374,336 360,000 2.3
----------- ----------- ------
428,799 406,000 2.6
Insurance 4,500 Aetna Inc. (c) 353,425 355,500 2.3
3,500 American International Group, Inc. 352,758 423,937 2.8
9,000 Travelers/Aetna Property Casualty Corp. 253,471 328,500 2.1
----------- ----------- ------
959,654 1,107,937 7.2
Leisure 3,500 Polygram N.V. (NY Registered Shares) 205,850 154,875 1.0
Medical Technology 3,000 ++Boston Scientific Corp. 189,613 204,750 1.3
6,000 Johnson & Johnson 286,361 345,750 2.3
----------- ----------- ------
475,974 550,500 3.6
Oil & Services 4,800 ++Diamond Offshore Drilling, Inc. 340,411 317,400 2.1
4,000 Schlumberger, Ltd. 416,591 444,500 2.9
----------- ----------- ------
757,002 761,900 5.0
Pharmaceuticals 4,000 ++Amgen, Inc. 238,125 225,500 1.5
1,500 Bristol-Myers Squibb Co. 144,171 190,500 1.2
5,500 Merck & Co., Inc. 363,473 499,125 3.3
7,000 Pfizer, Inc. 531,265 650,125 4.2
----------- ----------- ------
1,277,034 1,565,250 10.2
Photography 1,200 Eastman Kodak Co. 89,634 104,100 0.7
Pollution Control 500 WMX Technologies, Inc. 14,160 18,312 0.1
Restaurants 3,000 McDonald's Corp. 142,703 136,500 0.9
Retail--Specialty 6,800 Rite Aid Corp. 236,425 272,000 1.8
750 ++Staples, Inc. 13,000 15,375 0.1
----------- ----------- ------
249,425 287,375 1.9
<PAGE>
Retail Stores 5,000 Wal-Mart Stores, Inc. 120,805 118,750 0.8
Software--Computer 5,875 Computer Associates International, Inc. 297,390 266,578 1.7
5,000 ++Microsoft Corp. 360,850 509,375 3.3
1,000 ++Oracle Corp. (a) 35,973 38,750 0.3
----------- ----------- ------
694,213 814,703 5.3
Toys 8,000 Hasbro, Inc. 307,534 316,000 2.1
Travel & Lodging 1,000 Carnival Corporation (Class A) 26,786 36,750 0.2
Total Investments in Common Stocks 12,781,972 14,325,332 93.4
Face
Amount Short-Term Securities
US Government $ 524,000 Federal Home Loan Mortgage Corp., 523,840 523,840 3.4
Agency Obligations** 5.48% due 2/03/1997
Total Investments in Short-Term
Securities 523,840 523,840 3.4
Total Investments $13,305,812 14,849,172 96.8
===========
Other Assets Less Liabilities 492,626 3.2
----------- ------
Net Assets $15,341,798 100.0%
=========== ======
<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 Portfolio.
(a)Name changed from Oracle Systems Corp.
(b)Name changed from General Motors Corp. (Class E).
(c)Name changed from Aetna Life & Casualty Co.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Quality Bond Portfolio
S&P Moody's Face Value
INDUSTRIES Ratings Ratings Amount Bonds & Notes Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Asset-Backed AAA Aaa $150,000 Banc One Credit Card Master Trust, Series B, 7.55%
Securities--1.6% due 12/15/1999 $ 152,748 $ 151,922
Banking--21.3% AA- Aa3 150,000 Banc One Milwaukee, 6.625% due 4/15/2003 156,155 148,515
BBB+ A3 115,000 ++Bangkok Metropolitan Bank Public Co. Ltd., 7.25%
due 9/15/2005 113,956 112,618
A- A2 250,000 Bank of New York Company Inc. (The), 7.875% due
11/15/2002 276,675 262,300
BBB+ A1 100,000 Bank of New York Company Inc. (The), 7.97% due
12/31/2026 99,653 100,282
A+ A1 250,000 BankAmerica Corp., 6.65% due 5/01/2001 249,863 249,820
BBB- Baa3 200,000 Capital One Bank, 6.83% due 5/17/1999 202,324 201,410
A A2 253,000 First Chicago Corp., 9% due 6/15/1999 268,428 265,812
AA- Aa3 250,000 Norwest Corporation, 6.75% due 5/12/2000 249,628 252,573
BBB+ A2 200,000 Wells Fargo & Company, 8.375% due 5/15/2002 213,120 212,548
BBB A1 200,000 Wells Fargo Capital I, 7.96% due 12/15/2026 196,634 198,976
---------- ----------
2,026,436 2,004,854
</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 $ 200,778
Services--12.2% A A2 200,000 Beneficial Corporation, 7.75% due 11/08/2002 209,676 208,900
A A2 150,000 Dean Witter, Discover & Co., 6.30% due 1/15/2006 149,340 141,585
AA- A2 150,000 Pacific Mutual Life Insurance, Inc., 7.90%
due 12/30/2023 147,533 151,214
A- A2 150,000 Smith Barney Holdings, Inc., 6.875% due 6/15/2005 148,485 146,924
A A1 100,000 Travelers Capital II, 7.75% due 12/01/2036 100,170 96,142
A+ A1 200,000 The Travelers Group, Inc., 7.875% due 5/15/2025 205,616 204,932
---------- ----------
1,159,550 1,150,475
Financial A- A3 200,000 General Motors Acceptance Corp.,
Services-- 6.70% due 4/18/1997 203,006 200,448
Captive--2.1%
<PAGE>
Financial A+ A1 200,000 American General Finance Corp., 7.70% due
Services-- 11/15/1997 203,396 202,436
Consumer--5.1% AA- Aa3 200,000 Associates Corp. of North America, 5.25%
due 9/01/1998 193,918 197,164
A+ Aa3 75,000 CIT Group Holdings, Inc., 7% due 9/30/1997 75,607 75,571
---------- ----------
472,921 475,171
Industrial-- AA- A1 100,000 Anheuser-Busch Co., Inc., 8.75% due 12/01/1999 107,905 105,974
Consumer Goods-- A+ A1 100,000 Bass America, Inc., 8.125% due 3/31/2002 105,928 105,896
5.6% A- A2 100,000 Sears, Roebuck & Co., 9.25% due 4/15/1998 106,444 103,601
AA A2 200,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 207,350 210,804
---------- ----------
527,627 526,275
Industrial-- AA Aa2 175,000 BP America Inc., 9.375% due 11/01/2000 200,263 191,784
Energy--2.0%
Industrial-- A A2 150,000 Carnival Cruise Lines, Inc., 7.70% due 7/15/2004 156,745 155,160
Other--7.4% A+ A1 200,000 Ford Motor Credit Company, 7% due 9/25/2001 199,204 202,914
A- A3 90,000 IBP, Inc., 6.125% due 2/01/2006 82,690 84,357
BBB+ A3 250,000 Lockheed Martin Corp., 6.55% due 5/15/1999 249,880 250,972
---------- ----------
688,519 693,403
Industrial-- A A2 249,037 ++Disney Enterprises Inc., 6.85% due 1/10/2007** 248,870 247,294
Services--2.6%
Supranational-- AAA Aaa 200,000 Asian Development Bank, 6.125% due 3/09/2004 198,300 195,906
2.1%
US Government US Treasury Notes:
Obligations--9.3% AAA Aaa 150,000 7.125% due 10/15/1998 158,086 152,976
AAA Aaa 200,000 7.50% due 11/15/2001 210,406 209,938
AAA Aaa 200,000 5.875% due 2/15/2004 194,031 194,124
AAA Aaa 300,000 7.25% due 8/15/2004 321,937 314,343
---------- ----------
884,460 871,381
Utilities-- AA- Aa2 200,000 Duke Power Co., 8% due 11/01/1999 208,016 207,798
Electric--8.4% AA- A1 250,000 Northern States Power Company, 7.125% due 7/01/2025 254,800 243,665
A- A3 180,000 Public Service Electric & Gas Co., 7.125%
due 11/01/1997 181,514 181,193
A A2 150,000 Virginia Electric & Power Co., 8.625% due 10/01/2024 166,200 158,094
---------- ----------
810,530 790,750
Utilities-- A+ A2 300,000 Alltel Corp., 6.75% due 9/15/2005 295,380 295,152
Communications--
3.1%
<PAGE>
Yankees BBB+ Baa1 200,000 Crown Cork & Seal Company, Inc., 6.75% due 12/15/2003 198,926 197,820
Corporate--7.4% A A3 250,000 Mass Transit Railway Corp., 7.25% due 10/01/2005 260,325 250,577
A+ A2 100,000 Pohang Iron & Steel Company, Ltd., 7.375%
due 5/15/2005 101,816 100,805
BBB A3 150,000 State Development Bank of China, 7.375%
due 2/01/2007 149,601 149,601
---------- ----------
710,668 698,803
Yankees A+ A2 150,000 Province of Quebec, 7.125% due 2/09/2024 150,195 141,441
Sovereign--1.5%
Total Investments in Bonds & Notes--91.7% 8,729,473 8,635,059
SHORT-TERM
SECURITIES Issue
US Government & 758,000 Federal Home Loan Mortgage Corp., 5.48% 758,000 758,000
Agency due 2/03/1997
Obligations*--8.1%
Total Investments in Short-Term Securities--8.1% 758,000 758,000
Total Investments--99.8% $9,487,473 9,393,059
==========
Other Assets Less Liabilities--0.2% 22,083
----------
Net Assets--100.0% $9,415,142
==========
<FN>
*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.
**Subject to principal paydowns.
++The security may be offered and sold to "qualified institutional
investors" under Rule 144A of the Securities Act of 1933.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
US Government Securities Portfolio
Face Interest Maturity Value
Issue Amount Rate Date(s) (Note 1a)
<S> <S> <C> <C> <S> <C>
US Government & Federal Home Loan Mortgage Corporation $1,326,777 11.50 % 6/01/2019 $ 1,492,624
Agency Mortgage- Federal Home Loan Mortgage Corporation--
Backed Obligations*-- Gold Program 1,869,683 7.50 8/01/2025-10/01/2025 1,873,180
80.1% Federal Home Loan Mortgage Corporation--
Gold Program 1,000,000 7.00 1/01/2020 980,620
Federal Home Loan Mortgage Corporation--
Gold Program 2,770,686 6.50 2/01/2011-5/01/2011 2,725,909
Government National Mortgage Association 1,790,949 7.50 12/15/2022-10/01/2025 1,799,656
Total US Government & Agency Mortgage-Backed Obligations (Cost--$8,854,797) 8,871,989
US Government US Treasury Notes 700,000 6.00 8/15/1999 699,559
Obligations--13.6% US Treasury STRIPS**** 1,000,000 5.476++ 8/15/2000 806,120
Total US Government Obligations (Cost--$1,511,443) 1,505,679
SHORT-TERM
SECURITIES
US Government Federal National Mortgage Association, 1,000,000 5.25 2/13/1997 998,542
Agency Discount Note
Obligations***--9.0%
<CAPTION>
Face Amount Issue
<S> <C> <S> <C>
Repurchase $481,000 Nikkos Securities Company, purchased on 1/31/1997 to
Agreements**--4.4% yield 5.51% to 2/03/1997 481,000
Total Investments in Short-Term Securities (Cost--$1,479,542) 1,479,542
Total Investments (Cost--$11,845,782)--107.1% 11,857,210
Liabilities in Excess of Other Assets--(7.1%) (786,856)
-----------
Net Assets--100.0% $11,070,354
<PAGE> ===========
<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.
***Certain US Government Obligations are traded on a discount basis;
the interest rate shown is the discount rate paid at the time of
purchase by the Portfolio.
****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 January 31, 1997
Additions
*Applied Materials, Inc.
Black & Decker Corp.
*Data General Corp.
Dow Jones & Company, Inc.
GTE Corp.
Great Lakes Chemical Corporation
Harrah's Entertainment, Inc.
ITT Corp.
Integrated Device Technology, Inc.
Mentor Graphics Corporation
*Olympic Financial Ltd.
Transitional Hospitals Corp.
<PAGE>
Deletions
ADT Ltd.
*Applied Materials, Inc.
Camden Property Trust
Community Psychiatric Centers
*Data General Corp.
Downey Financial Corporation
Fingerhut Companies, Inc.
Micron Technology, Inc.
*Olympic Financial Ltd.
Storage Technology Corp.
TETRA Technologies, Inc.
GLOBAL
OPPORTUNITY
PORTFOLIO
For the Quarter Ended January 31, 1997
Additions
AlliedSignal, Inc.
American Home Products Corporation
BankAmerica Corp.
Black & Decker Corp.
Brunswick Corporation
Cabletron Systems, Inc.
Centocor, Inc.
Compaq Computer Corp.
Countrywide Credit Industries, Inc.
*Covance, Inc.
El Paso Natural Gas Co.
IMC Global, Inc.
Imax Corporation
Imperial Chemical Industries PLC
*Linear Technology Corp.
Oakwood Homes Corporation
Puma AG
*Quest Diagnostics Inc.
Rite Aid Corporation
*Seat S.p.A.
Travelers Group Inc.
<PAGE>
Deletions
Banco de Galicia y Buenos Aires S.A.
(Rights)
Baxter International, Inc.
The Boeing Co.
The Coca-Cola Company
*Covance, Inc.
Deere & Company
Electronic Data Systems Corp.
The Limited, Inc.
*Linear Technology Corp.
Microsoft Corp.
Northern Telecom Ltd.
PPG Industries, Inc.
Procter & Gamble Company
*Quest Diagnostics Inc.
*Seat S.p.A.
Spieker Properties, Inc.
Thrifty Payless Holdings, Inc. (Class B)
Toys 'R' Us, Inc.
GROWTH
OPPORTUNITY
PORTFOLIO
For the Quarter Ended January 31, 1997
Additions
cisco Systems, Inc.
Diamond Offshore Drilling, Inc.
FORE Systems, Inc.
Hewlett-Packard Co.
Honeywell, Inc.
Lucent Technologies, Inc.
Telefonaktiebolaget LM Ericsson (ADR)
US Bancorp
<PAGE>
Deletions
Duracell International, Inc.
MCI Communications Corp.
Pharmacia & Upjohn, Inc.
SmithKline Beecham Corp. PLC (ADR)
[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 January 31, 1997 Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C> <C>
Assets: Investments, at value*
(Note 1a) $54,377,700 $42,893,999 $14,849,172 $ 9,393,059 $11,857,210
Foreign cash (Note 1c) -- 612 -- -- --
Cash 5,013 107 9,484 1,089 777
Unrealized appreciation on
forward foreign exchange
contracts (Note 1b) -- 656,544 -- -- --
Receivables:
Securities sold 128,566 284,558 319,295 153,158 --
Interest -- 183,512 -- 157,437 89,243
Capital shares sold 141,339 160,850 149,379 6,276 3,217
Investment adviser (Note 2) -- -- -- 63,210 70,037
Dividends 24,747 42,378 13,826 -- --
Principal paydowns -- -- -- -- 13,309
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 46,558 12,346 61,682 45,987
----------- ----------- ----------- ----------- -----------
Total assets 54,798,699 44,321,009 15,418,012 9,848,646 12,107,629
----------- ----------- ----------- ----------- -----------
Liabilities: Payables:
Securities purchased 290,284 237,250 -- 361,750 973,896
Capital shares redeemed 72,665 53,130 14,951 26,389 12,379
Distributor (Note 2) 42,296 34,540 11,583 4,556 4,195
Investment adviser (Note 2) 29,300 27,192 7,874 -- --
Dividends to shareholders
(Note 1g) -- -- -- 16,399 18,474
Forward foreign exchange
contracts (Note 1b) -- 1,190 -- -- --
Accrued expenses and other
liabilities 125,457 115,048 41,806 24,410 28,331
----------- ----------- ----------- ----------- -----------
Total liabilities 560,002 468,350 76,214 433,504 1,037,275
----------- ----------- ----------- ----------- -----------
<PAGE>
Net Assets: Net assets $54,238,697 $43,852,659 $15,341,798 $ 9,415,142 $11,070,354
=========== =========== =========== =========== ===========
Net Assets Class A Common Stock, $0.10
Consist of: par value++ $ 1,541 $ 1,081 $ 487 $ 23,012 $ 43,989
Class B Common Stock, $0.10
par value++++ 260,068 256,992 84,072 49,276 44,275
Class C Common Stock, $0.10
par value++++++ 112,153 90,008 39,831 19,256 17,239
Class D Common Stock, $0.10
par value++++++++ 30,862 21,774 6,952 4,618 3,065
Paid-in capital in excess
of par 45,653,660 38,384,675 13,442,355 9,467,890 10,947,717
Accumulated investment
loss--net (478,635) (10,827) (154,034) -- --
Undistributed (accumulated)
realized capital gains
(losses) on investments and
foreign currency
transactions--net(Note 7) 3,451,814 491,980 378,775 (19,779) 2,641
Accumulated distributions
in excess of realized
capital gains on investments
--net (Note 1g) -- -- -- (34,717) --
Unrealized appreciation
(depreciation) on investments
and foreign currency
transactions--net 5,207,234 4,616,976 1,543,360 (94,414) 11,428
----------- ----------- ----------- ----------- -----------
Net assets $54,238,697 $43,852,659 $15,341,798 $ 9,415,142 $11,070,354
=========== =========== =========== =========== ===========
Net Asset Value: Class A:
Net assets $ 209,226 $ 129,067 $ 57,448 $ 2,253,978 $ 4,485,747
=========== =========== =========== =========== ===========
Shares outstanding 15,411 10,815 4,873 230,122 439,890
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 13.58 $ 11.93 $ 11.79 $ 9.79 $ 10.20
=========== =========== =========== =========== ===========
Class B:
Net assets $34,827,598 $30,468,965 $ 9,816,397 $ 4,824,038 $ 4,514,545
=========== =========== =========== =========== ===========
Shares outstanding 2,600,676 2,569,917 840,723 492,756 442,746
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 13.39 $ 11.86 $ 11.68 $ 9.79 $ 10.20
=========== =========== =========== =========== ===========
<PAGE>
Class C:
Net assets $15,021,781 $10,658,359 $ 4,648,954 $ 1,885,012 $ 1,757,414
=========== =========== =========== =========== ===========
Shares outstanding 1,121,527 900,077 398,309 192,563 172,388
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 13.39 $ 11.84 $ 11.67 $ 9.79 $ 10.19
=========== =========== =========== =========== ===========
Class D:
Net assets $ 4,180,092 $ 2,596,268 $ 818,999 $ 452,114 $ 312,648
=========== =========== =========== =========== ===========
Shares outstanding 308,620 217,736 69,522 46,182 30,648
=========== =========== =========== =========== ===========
Net asset value and
redemption price per share $ 13.54 $ 11.92 $ 11.78 $ 9.79 $ 10.20
=========== =========== =========== =========== ===========
<FN>
*Identified cost $49,170,466 $38,922,276 $13,305,812 $ 9,487,473 $11,845,782
=========== =========== =========== =========== ===========
++Authorized shares--Class A 6,250,000 6,250,000 6,250,000 6,250,000 26,250,000
=========== =========== =========== =========== ===========
++++Authorized shares--Class B 6,250,000 6,250,000 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 Year Ended Value Opportunity Opportunity Bond Securities
January 31, 1997 Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <S> <C> <C> <C> <C> <C>
Investment Income Interest and discount earned* $ 245,212 $ 627,518 $ 70,071 $ 549,506 $ 703,108
(Notes 1d & 1e): Dividends** 614,117 528,065 105,824 -- --
Other -- -- -- 492 --
----------- ----------- ----------- ----------- -----------
Total income 859,329 1,155,583 175,895 549,998 703,108
----------- ----------- ----------- ----------- -----------
<PAGE>
Expenses: Registration fees (Note 1f) 87,658 267,666 61,496 105,639 169,918
Investment advisory fees
(Note 2) 284,074 255,998 57,884 40,461 52,827
Account maintenance and
distribution fees--Class B
(Note 2) 283,793 237,750 52,397 29,716 28,821
Transfer agent fees--Class B
(Note 2) 157,251 145,212 41,517 21,851 10,648
Printing and shareholder
reports 117,813 99,268 19,846 21,580 13,409
Account maintenance and
distribution fees--Class C
(Note 2) 117,326 79,435 24,977 12,944 11,916
Accounting services (Note 2) 96,812 76,883 24,366 20,217 4,466
Transfer agent fees--Class C
(Note 2) 68,439 51,576 20,825 9,301 4,356
Professional fees 50,859 40,525 3,683 12,005 15,372
Custodian fees 21,670 46,515 13,524 11,297 12,179
Amortization of organization
expenses (Note 1f) 7,413 17,297 16,127 4,260 9,300
Transfer agent fees--Class D
(Note 2) 15,856 10,464 3,156 1,422 530
Transfer agent fees--Class A
(Note 2) 754 1,854 4,986 9,543 10,017
Directors' fees and expenses 10,606 8,594 865 2,174 3,030
Account maintenance fees--
Class D (Note 2) 8,573 5,122 1,192 819 664
Pricing fees (Note 2) 273 5,492 120 2,701 1,555
Other 8,794 6,225 946 5,829 4,532
----------- ----------- ----------- ----------- -----------
Total expenses before
reimbursement 1,337,964 1,355,876 347,907 311,759 353,540
Reimbursement of expenses
(Note 2) -- (87,899) (17,978) (268,280) (312,139)
----------- ----------- ----------- ----------- -----------
Total expenses after
reimbursement 1,337,964 1,267,977 329,929 43,479 41,401
----------- ----------- ----------- ----------- -----------
Investment income (loss)--net (478,635) (112,394) (154,034) 506,519 661,707
----------- ----------- ----------- ----------- -----------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Investments--net 6,235,956 1,275,133 378,775 (51,285) 243
Gain (Loss) on Foreign currency
Investments & transactions--net -- 178,163 -- -- --
Foreign Currency Change in unrealized
Transactions--Net appreciation (depreciation)
(Notes 1b, 1c, on:
1e & 3): Investments--net 2,839,304 2,283,988 1,543,360 (231,164) (194,411)
Foreign currency
transactions--net -- 626,707 -- -- --
----------- ----------- ----------- ----------- -----------
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 9,075,260 4,363,991 1,922,135 (282,449) (194,168)
----------- ----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations $ 8,596,625 $ 4,251,597 $ 1,768,101 $ 224,070 $ 467,539
=========== =========== =========== =========== ===========
<FN>
*Net of foreign withholding
tax on interest -- $ 5,366 -- -- --
=========== =========== =========== =========== ===========
**Net of foreign
withholding tax on
dividends $ 15,579 $ 30,457 $ 828 -- --
=========== =========== =========== =========== ===========
++The Portfolio commenced operations on February 2, 1996.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Fundamental Global Opportunity
Value Portfolio Portfolio
For the Year Ended For the Year Ended
January 31, January 31,
Increase (Decrease) in Net Assets: 1997 1996++ 1997 1996++
<S> <S> <C> <C> <C> <C>
Operations: Investment income (loss)--net $ (478,635) $ (81,282) $ (112,394) $ 363,179
Realized gain (loss) on investments
and foreign currency transactions--net 6,235,956 563,770 1,453,296 (132,463)
Change in unrealized appreciation on
investments and foreign currency
transactions--net 2,839,304 2,367,930 2,910,695 1,706,281
----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations 8,596,625 2,850,418 4,251,597 1,936,997
----------- ----------- ----------- -----------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A -- -- -- (90,788)
Shareholders Class B -- -- -- (193,635)
(Note 1g): Class C -- -- -- (56,404)
Class D -- -- -- (22,352)
In excess of investment income--net:
Class A -- -- (1,274) (28,087)
Class B -- -- (65,176) (59,905)
Class C -- -- (25,328) (17,449)
Class D -- -- (21,506) (6,915)
Realized gain on investments--net:
Class A (11,190) (1,832) (1,213) --
Class B (1,597,213) (326,209) (298,844) --
Class C (693,946) (125,467) (104,853) --
Class D (215,995) (38,990) (25,165) --
In excess of realized gain on
investments--net:
Class A -- (978) -- (14,537)
Class B -- (174,333) -- (41,351)
Class C -- (67,053) -- (11,895)
Class D -- (20,837) -- (3,787)
Return of capital--net:
Class A -- (265) -- --
Class B -- (47,208) -- --
Class C -- (18,157) -- --
Class D -- (5,642) -- --
----------- ----------- ----------- -----------
Net decrease in net assets resulting
from dividends and distributions to
shareholders (2,518,344) (826,971) (543,359) (547,105)
----------- ----------- ----------- -----------
Capital Share Net increase in net assets derived from
Transactions capital share transactions 16,589,653 29,522,316 14,719,748 24,009,781
(Note 4): ----------- ----------- ----------- -----------
Net Assets: Total increase in net assets 22,667,934 31,545,763 18,427,986 25,399,673
Beginning of year 31,570,763 25,000 25,424,673 25,000
----------- ----------- ----------- -----------
End of year $54,238,697 $31,570,763 $43,852,659 $25,424,673
=========== =========== =========== ===========
<FN>
++The Program commenced operations on February 1, 1995.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (concluded)
<CAPTION>
Growth Quality US Government
Opportunity Bond Securities
Portfolio Portfolio Portfolio
For the For the For the
Period Feb. 2, Year Ended Year Ended
Increase (Decrease) in 1996++++ to January 31, January 31,
Net Assets: Jan. 31, 1997 1997 1996++ 1997 1996++
<S> <S> <C> <C> <C> <C> <C>
Operations: Investment income (loss)--net $ (154,034) $ 506,519 $ 270,217 $ 661,707 $ 531,974
Realized gain (loss) on
investments--net 378,775 (51,285) 31,507 243 297,048
Change in unrealized
appreciation (depreciation)
on investments--net 1,543,360 (231,164) 136,749 (194,411) 205,839
----------- ----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations 1,768,101 224,070 438,473 467,539 1,034,861
----------- ----------- ----------- ----------- -----------
Dividends & Investment income--net:
Distributions to Class A -- (150,009) (128,948) (329,353) (393,269)
Shareholders Class B -- (238,507) (101,375) (222,614) (98,505)
(Note 1g): Class C -- (96,264) (31,396) (85,215) (33,445)
Class D -- (21,739) (8,498) (16,900) (6,755)
Realized gain on investments
--net:
Class A -- -- -- (32,773) (133,258)
Class B -- -- -- (29,573) (64,660)
Class C -- -- -- (12,740) (23,204)
Class D -- -- -- (2,220) (3,847)
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 -- (541,236) (270,217) (731,388) (756,943)
----------- ----------- ----------- ----------- -----------
<PAGE>
Capital Share Net increase in net assets
Transactions derived from capital share
(Note 4): transactions 13,569,697 3,143,735 6,395,317 1,556,845 9,474,440
----------- ----------- ----------- ----------- -----------
Net Assets: Total increase in net assets 15,337,798 2,826,569 6,563,573 1,292,996 9,752,358
Beginning of period 4,000 6,588,573 25,000 9,777,358 25,000
----------- ----------- ----------- ----------- -----------
End of period $15,341,798 $ 9,415,142 $ 6,588,573 $11,070,354 $ 9,777,358
=========== =========== =========== =========== ===========
<FN>
++The Program commenced operations on February 1, 1995.
++++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Fundamental Value Portfolio++
Class A Class B
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++++ 1997 1996++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.67 $ 10.00 $ 11.55 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net (.01) .25 (.15) (.07)
Realized and unrealized gain on
investments --net 2.70 1.76 2.65 1.96
------- ------- ------- -------
Total from investment operations 2.69 2.01 2.50 1.89
------- ------- ------- -------
Less 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 distributions (.78) (.34) (.66) (.34)
------- ------- ------- -------
Net asset value, end of year $ 13.58 $ 11.67 $ 13.39 $ 11.55
======= ======= ======= =======
<PAGE>
Total Investment Based on net asset value per share 23.20% 20.10%+++ 21.79% 18.89%+++
Return:* ======= ======= ======= =======
Ratio to Expenses, net of reimbursement 2.03% 1.54% 3.11% 3.29%
Average Net ======= ======= ======= =======
Assets: Expenses 2.03% 2.00% 3.11% 3.39%
======= ======= ======= =======
Investment income (loss)--net (.07%) 1.99% (1.15%) (.61%)
======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $ 209 $ 121 $34,828 $20,989
Data: ======= ======= ======= =======
Portfolio turnover 80.60% 51.37% 80.60% 51.37%
======= ======= ======= =======
Average commission rate paid+++++ $ .0539 -- $ .0539 --
======= ======= ======= =======
<CAPTION>
Fundamental Value Portfolio++
Class C Class D
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++++ 1997 1996++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.55 $ 10.00 $ 11.65 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net (.15) (.09) (.04) .03
Realized and unrealized gain on
investments--net 2.66 1.98 2.68 1.96
------- ------- ------- -------
Total from investment operations 2.51 1.89 2.64 1.99
------- ------- ------- -------
Less 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 distributions (.67) (.34) (.75) (.34)
------- ------- ------- -------
Net asset value, end of year $ 13.39 $ 11.55 $ 13.54 $ 11.65
======= ======= ======= =======
Total Investment Based on net asset value per share 21.82% 18.89%+++ 22.82% 19.90%+++
Return:* ======= ======= ======= =======
<PAGE>
Ratio to Expenses, net of reimbursement 3.15% 3.38% 2.27% 2.45%
Average Net ======= ======= ======= =======
Assets: Expenses 3.15% 3.46% 2.27% 2.56%
======= ======= ======= =======
Investment income (loss)--net (1.19%) (.75%) (.31%) .24%
======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $15,022 $ 7,990 $ 4,180 $ 2,471
Data: ======= ======= ======= =======
Portfolio turnover 80.60% 51.37% 80.60% 51.37%
======= ======= ======= =======
Average commission rate paid+++++ $ .0539 -- $ .0539 --
======= ======= ======= =======
<FN>
*Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
++++The Program commenced operations on February 1, 1995.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995, the
Program 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>
Global Opportunity Portfolio++
Class A Class B
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++++ 1997 1996++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.82 $ 10.00 $ 10.76 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net .15 .34 (.04) .13
Realized and unrealized gain on
investments--net 1.21 .77 1.29 .85
------- ------- ------- -------
<PAGE> Total from investment operations 1.36 1.11 1.25 .98
------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- (.20) -- (.15)
In excess of investment income on
investments--net (.13) (.06) (.03) (.04)
Realized gain on investments--net (.12) -- (.12) --
In excess of realized gain on
investments--net -- (.03) -- (.03)
------- ------- ------- -------
Total dividends and distributions (.25) (.29) (.15) (.22)
------- ------- ------- -------
Net asset value, end of year $ 11.93 $ 10.82 $ 11.86 $ 10.76
======= ======= ======= =======
Total Investment Based on net asset value per share 12.68% 11.15%+++ 11.67% 9.89%+++
Return:** ======= ======= ======= =======
Ratio to Expenses, net of reimbursement 2.47% 2.01% 3.76% 3.50%
Average Net ======= ======= ======= =======
Assets: Expenses 2.90% 2.32% 4.01% 3.61%
======= ======= ======= =======
Investment income--net 1.83% 2.92% (.39%) 1.20%
======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $ 129 $ 3,025 $30,469 $16,117
Data: ======= ======= ======= =======
Portfolio turnover 125.68% 83.14% 125.68% 83.14%
======= ======= ======= =======
Average commission rate paid+++++ $ .0170 -- $ .0170 --
======= ======= ======= =======
<CAPTION>
Global Opportunity Portfolio++
Class C Class D
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++++ 1997 1996++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.75 $ 10.00 $ 10.80 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income (loss)--net (.05) .12 .05 .22
Realized and unrealized gain on
investments--net 1.29 .85 1.29 .85
------- ------- ------- -------
Total from investment operations 1.24 .97 1.34 1.07
<PAGE> ------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- (.15) -- (.18)
In excess of investment income on
investments--net (.03) (.04) (.10) (.06)
Realized gain on investments--net (.12) -- (.12) --
In excess of realized gain on
investments--net -- (.03) -- (.03)
------- ------- ------- -------
Total dividends and distributions (.15) (.22) (.22) (.27)
------- ------- ------- -------
Net asset value, end of year $ 11.84 $ 10.75 $ 11.92 $ 10.80
======= ======= ======= =======
Total Investment Based on net asset value per share 11.61% 9.81%+++ 12.56% 10.80%+++
Return:** ======= ======= ======= =======
Ratio to Expenses, net of reimbursement 3.81% 3.58% 2.91% 2.67%
Average Net ======= ======= ======= =======
Assets: Expenses 4.06% 3.65% 3.17% 2.77%
======= ======= ======= =======
Investment income--net (.46%) 1.07% .48% 2.00%
======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $10,659 $ 4,770 $ 2,596 $ 1,513
Data: ======= ======= ======= =======
Portfolio turnover 125.68% 83.14% 125.68% 83.14%
======= ======= ======= =======
Average commission rate paid+++++ $ .0170 -- $ .0170 --
======= ======= ======= =======
<CAPTION>
The following per share data and ratios
have been derived from information Growth Opportunity Portfolio++
provided in the financial statements.
For the Period February 2, 1996++++++ to January 31, 1997
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 10.00 $ 10.00
Operating ---------- ---------- ---------- ----------
Performance: Investment income (loss)--net .03 (.21) (.22) (.11)
Realized and unrealized gain on
investments--net 1.76 1.89 1.89 1.89
---------- ---------- ---------- ----------
Total from investment operations 1.79 1.68 1.67 1.78
---------- ---------- ---------- ----------
Net asset value, end of period $ 11.79 $ 11.68 $ 11.67 $ 11.78
========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset value per share 17.90%+++ 16.80%+++ 16.70%+++ 17.80%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 2.44%* 3.84%* 3.88%* 2.94%*
Net Assets: ========== ========== ========== ==========
Expenses 3.08%* 4.00%* 4.05%* 3.13%*
========== ========== ========== ==========
Investment income (loss)--net .23%* (1.93%)* (1.98%)* (1.00%)*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 58 $ 9,816 $ 4,649 $ 819
Data: ========== ========== ========== ==========
Portfolio turnover 51.63% 51.63% 51.63% 51.63%
========== ========== ========== ==========
Average commission rate paid+++++ $ .0626 $ .0626 $ .0626 $ .0626
========== ========== ========== ==========
<CAPTION>
Quality Bond Portfolio
Class A Class B
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++++ 1997 1996++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.27 $ 10.00 $ 10.27 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .68 .62 .59 .54
Realized and unrealized gain (loss) on
investments--net (.44) .27 (.44) .27
------- ------- ------- -------
Total from investment operations .24 .89 .15 .81
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.68) (.62) (.59) (.54)
In excess of realized gain on
investments--net (.04) -- (.04) --
------- ------- ------- -------
Total dividends and distributions (.72) (.62) (.63) (.54)
------- ------- ------- -------
Net asset value, end of year $ 9.79 $ 10.27 $ 9.79 $ 10.27
======= ======= ======= =======
Total Investment Based on net asset value per share 2.51% 9.26%+++ 1.62% 8.35%+++
Return:** ======= ======= ======= =======
<PAGE>
Ratios to Average Expenses, net of reimbursement .00% .00% .78% .79%
Net Assets: ======= ======= ======= =======
Expenses 3.23% 2.60% 4.08% 3.31%
======= ======= ======= =======
Investment income--net 6.85% 6.22% 6.00% 5.52%
======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $ 2,254 $ 2,196 $ 4,824 $ 3,049
Data: ======= ======= ======= =======
Portfolio turnover 91.10% 86.68% 91.10% 86.68%
======= ======= ======= =======
<CAPTION>
Quality Bond Portfolio
Class C Class D
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++++ 1997 1996++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.27 $ 10.00 $ 10.27 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .58 .53 .65 .60
Realized and unrealized gain (loss) on
investments--net (.44) .27 (.44) .27
------- ------- ------- -------
Total from investment operations .14 .80 .21 .87
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.58) (.53) (.65) (.60)
In excess of realized gain on
investments--net (.04) -- (.04) --
------- ------- ------- -------
Total dividends and distributions (.62) (.53) (.69) (.60)
------- ------- ------- -------
Net asset value, end of year $ 9.79 $ 10.27 $ 9.79 $ 10.27
======= ======= ======= =======
Total Investment Based on net asset value per share 1.55% 8.27%+++ 2.25% 8.99%+++
Return:** ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .85% .87% .16% .19%
Net Assets: ======= ======= ======= =======
Expenses 4.15% 3.44% 3.47% 2.70%
======= ======= ======= =======
Investment income--net 5.93% 5.46% 6.62% 6.11%
======= ======= ======= =======
<PAGE>
Supplemental Net assets, end of year (in thousands) $ 1,885 $ 1,123 $ 452 $ 221
Data: ======= ======= ======= =======
Portfolio turnover 91.10% 86.68% 91.10% 86.68%
======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
++++The Program commenced operations on February 1, 1995.
++++++Commencement of Operations.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995, the
Program 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 (concluded)
<CAPTION>
US Government Securities Portfolio
Class A Class B
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++ 1997 1996++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.48 $ 10.00 $ 10.48 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .69 .76 .60 .68
Realized and unrealized gain (loss) on
investments--net (.21) .74 (.21) .74
------- ------- ------- -------
Total from investment operations .48 1.50 .39 1.42
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.69) (.76) (.60) (.68)
Realized gain on investments--net (.07) (.26) (.07) (.26)
------- ------- ------- -------
Total dividends and distributions (.76) (1.02) (.67) (.94)
------- ------- ------- -------
Net asset value, end of year $ 10.20 $ 10.48 $ 10.20 $ 10.48
======= ======= ======= =======
<PAGE>
Total Investment Based on net asset value per share 4.76% 15.47%+++ 3.90% 14.53%+++
Return:* ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .00% .00% .78% .81%
Net Assets: ======= ======= ======= =======
Expenses 2.92% 2.54% 3.72% 3.35%
======= ======= ======= =======
Investment income--net 6.69% 7.30% 5.85% 6.28%
======= ======= ======= =======
Supplemental Net assets, end of year (in thousands) $ 4,486 $ 5,463 $ 4,514 $ 3,043
Data: ======= ======= ======= =======
Portfolio turnover 27.32% 113.05% 27.32% 113.05%
======= ======= ======= =======
<CAPTION>
US Government Securities Portfolio
Class C Class D
The following per share data and ratios have
been derived from information provided in For the For the
the financial statements. Year Ended Year Ended
January 31, January 31,
Increase (Decrease) in Net Asset Value: 1997 1996++ 1997 1996++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.47 $ 10.00 $ 10.48 $ 10.00
Operating ------- ------- ------- -------
Performance: Investment income--net .59 .67 .66 .74
Realized and unrealized gain (loss) on
investments--net (.21) .73 (.21) .74
------- ------- ------- -------
Total from investment operations .38 1.40 .45 1.48
------- ------- ------- -------
Less dividends and distributions:
Investment income--net (.59) (.67) (.66) (.74)
Realized gain on investments--net (.07) (.26) (.07) (.26)
------- ------- ------- -------
Total dividends and distributions (.66) (.93) (.73) (1.00)
------- ------- ------- -------
Net asset value, end of year $ 10.19 $ 10.47 $ 10.20 $ 10.48
======= ======= ======= =======
Total Investment Based on net asset value per share 3.83% 14.36%+++ 4.49% 15.13%+++
Return:* ======= ======= ======= =======
Ratios to Average Expenses, net of reimbursement .85% .86% .21% .22%
Net Assets: ======= ======= ======= =======
Expenses 3.78% 3.41% 3.14% 2.77%
======= ======= ======= =======
Investment income--net 5.78% 6.21% 6.42% 6.90%
======= ======= ======= =======
<PAGE>
Supplemental Net assets, end of year (in thousands) $ 1,757 $ 1,089 $ 313 $ 182
Data: ======= ======= ======= =======
Portfolio turnover 27.32% 113.05% 27.32% 113.05%
======= ======= ======= =======
<FN>
*Total investment returns exclude the effect 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. 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.
<PAGE>
(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.
<PAGE>
* 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.
<PAGE>
(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.
NOTES TO FINANCIAL STATEMENTS (continued)
(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
(including 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.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting for foreign
currency transactions. Accordingly, current year's permanent book/tax
differences of $327,207 in the Global Opportunity Portfolio have
been reclassified between undistributed net realized capital gains
and accumulated net investment loss. These reclassifications have
no effect on net assets or net asset values per share.
<PAGE>
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 year ended January 31, 1997, MLAM had voluntarily waived
management fees and reimbursed each Portfolio for additional
expenses as follows:
Management Additional
Fee Expenses
Global Opportunity Portfolio $87,899 --
Growth Opportunity Portfolio $17,978 --
Quality Bond Portfolio $40,461 $227,819
US Government Securities Portfolio $52,827 $259,312
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%
<PAGE>
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 year ended January 31, 1997, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of each
Portfolio's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A Class D Class A Class D
Fundamental Value Portfolio $ 9 $1,669 $174 $32,996
Global Opportunity Portfolio $ 3 $1,415 $ 95 $27,404
Growth Opportunity Portfolio++ -- $1,004 -- $19,465
Quality Bond Portfolio -- $ 307 -- $ 4,370
US Government Securities
Portfolio -- $ 120 -- $ 1,709
[FN]
++The Portfolio commenced operations February 2, 1996.
For the year ended January 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 $55,593 $5,793
Global Opportunity Portfolio $51,643 $4,084
Growth Opportunity Portfolio++ $ 9,146 $1,138
Quality Bond Portfolio $ 7,529 $1,038
US Government Securities Portfolio $ 5,590 $ 358
<PAGE>
[FN]
++The Portfolio commenced operations February 2, 1996.
In addition, MLPF&S received $2,085, $1,813, and $1,578 in
commissions on the execution of portfolio security transactions for
the Fundamental Value, Global Opportunity and Growth Opportunity
Portfolios, respectively, for the year ended January 31, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Program's transfer agent.
During the year ended January 31, 1997, Global Opportunity, Quality
Bond and US Government Securities Portfolios paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $1,011, $1,504 and
$617, 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 year ended January 31, 1997 were as follows:
Purchases Sales
Fundamental Value Portfolio $38,665,447 $31,125,811
Global Opportunity Portfolio $59,985,463 $38,015,146
Growth Opportunity Portfolio++ $16,328,886 $ 3,925,675
Quality Bond Portfolio $ 9,999,706 $ 6,451,130
US Government Securities Portfolio $ 3,932,154 $ 2,666,033
[FN]
++The Portfolio commenced operations February 2, 1996.
Net realized and unrealized gains (losses) as of January 31, 1997
were as follows:
Realized
Gains Unrealized
Fundamental Value Portfolio (Losses) Gains
Long-term investments $6,235,957 $5,207,234
Short-term investments (1) --
---------- ----------
Total $6,235,956 $5,207,234
========== ==========
<PAGE>
Realized Unrealized
Gains Gains
Global Opportunity Portfolio (Losses) (Losses)
Long-term investments $1,275,221 $3,971,723
Short-term investments (88) --
Foreign currency transactions 74,238 (11,291)
Forward foreign exchange contracts 103,925 656,544
---------- ----------
Total $1,453,296 $4,616,976
========== ==========
Realized Unrealized
Growth Opportunity Portfolio++ Gains Gains
Long-term investments $ 378,775 $1,543,360
---------- ----------
Total $ 378,775 $1,543,360
========== ==========
[FN]
++The Portfolio commenced operations February 2, 1996.
Realized Unrealized
Quality Bond Portfolio Losses Losses
Long-term investments $ (51,285) $ (94,414)
---------- ----------
Total $ (51,285) $ (94,414)
========== ==========
Realized Unrealized
US Government Securities Portfolio Gains Gains
Long-term investments $ 243 $ 11,428
---------- ----------
Total $ 243 $ 11,428
========== ==========
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
As of January 31, 1997, net unrealized appreciation (depreciation)
for Federal income tax purposes was as follows:
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
Fundamental Value
Portfolio $6,905,391 $ (1,728,060) $5,177,331
Global Opportunity
Portfolio $5,406,207 $ (1,460,003) $3,946,204
Growth Opportunity
Portfolio++ $1,774,721 $ (236,291) $1,538,430
Quality Bond Portfolio $ 24,907 $ (119,321) $ (94,414)
US Government Securities
Portfolio $ 86,362 $ (74,934) $ 11,428
[FN]
++The Portfolio commenced operations on February 2, 1996.
The aggregate cost of investments at January 31, 1997 for Federal
income tax purposes was $49,200,369 for the Fundamental Value
Portfolio, $38,947,795 for the Global Opportunity Portfolio,
$13,310,742 for the Growth Opportunity Portfolio, $9,487,473 for the
Quality Bond Portfolio, and $11,845,782 for the US Government
Securities Portfolio.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
for the year ended January 31, 1997 and the period February 1, 1995
to January 31, 1996, respectively, were as follows:
For the For the Period
Year Ended Feb. 1, 1995++ to
Jan. 31, 1997 Jan. 31, 1996
Fundamental Value Portfolio $16,589,653 $29,522,316
Global Opportunity Portfolio $14,719,748 $24,009,781
Growth Opportunity Portfolio++++ $13,569,697 --
Quality Bond Portfolio $ 3,143,735 $ 6,395,317
US Government Securities Portfolio $ 1,556,845 $ 9,474,440
[FN]
++Commencement of operations of the Program.
++++The Portfolio commenced operations on February 2, 1996.
<PAGE>
Transactions in capital shares for each class were as follows:
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 A Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 211,092 $ 2,121,694
Shares issued to shareholders in
reinvestment of distributions 226 2,614
------------ ------------
Total issued 211,318 2,124,308
Shares redeemed (201,602) (2,349,514)
------------ ------------
Net increase (decrease) 9,716 $ (225,206)
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Fundamental Value Portfolio
Class B Shares for the 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
============ ============
<PAGE>
Fundamental Value Portfolio
Class B Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 1,898,235 $ 20,687,636
Shares issued to shareholders in
reinvestment of distributions 46,363 530,851
------------ ------------
Total issued 1,944,598 21,218,487
Shares redeemed (128,079) (1,426,547)
------------ ------------
Net increase 1,816,519 $ 19,791,940
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
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
============ ============
Fundamental Value Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 722,871 $ 7,998,489
Shares issued to shareholders in
reinvestment of distributions 17,800 203,810
------------ ------------
Total issued 740,671 8,202,299
Shares redeemed (49,444) (560,243)
------------ ------------
Net increase 691,227 $ 7,642,056
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
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
============ ============
Fundamental Value Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to July 31, 1995 Shares Amount
Shares sold 217,786 $ 2,387,449
Shares issued to shareholders in
reinvestment of distributions 5,449 62,881
------------ ------------
Total issued 223,235 2,450,330
Shares redeemed (11,765) (136,804)
------------ ------------
Net increase 211,470 $ 2,313,526
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
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 A Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 835,209 $ 8,372,011
Shares issued to shareholders in
reinvestment of dividends and
distributions 12,609 133,409
------------ ------------
Total issued 847,818 8,505,420
Shares redeemed (568,796) (6,107,760)
------------ ------------
Net increase 279,022 $ 2,397,660
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class B Shares for the 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
============ ============
<PAGE>
Global Opportunity Portfolio
Class B Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 1,579,063 $ 16,389,513
Shares issued to shareholders in
reinvestment of dividends and
distributions 27,153 286,188
------------ ------------
Total issued 1,606,216 16,675,701
Automatic conversion of shares (12,547) (136,198)
Shares redeemed (96,530) (1,007,511)
------------ ------------
Net increase 1,497,139 $ 15,531,992
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
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
============ ============
NOTES TO FINANCIAL STATEMENTS (continued)
<PAGE>
Global Opportunity Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 460,425 $ 4,809,137
Shares issued to shareholders in
reinvestment of dividends and
distributions 7,790 82,108
------------ ------------
Total issued 468,215 4,891,245
Shares redeemed (25,280) (268,389)
------------ ------------
Net increase 442,935 $ 4,622,856
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Global Opportunity Portfolio
Class D Shares for the 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
============ ============
Global Opportunity Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 129,359 $ 1,346,418
Automatic conversion of shares 12,498 136,198
Shares issued to shareholders in
reinvestment of dividends and
distributions. 3,015 31,872
------------ ------------
Total issued 144,872 1,514,488
Shares redeemed (5,436) (57,215)
------------ ------------
Net increase 139,436 $ 1,457,273
============ ============
<PAGE>
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Growth Opportunity Portfolio
Class A Shares for the Period Dollar
February 2, 1996++ to 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 Period Dollar
February 2, 1996++ to 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 Period Dollar
February 2, 1996++ to January 31, 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.
<PAGE>
Growth Opportunity Portfolio
Class D Shares for the Period Dollar
February 2, 1996++ to January 31, 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 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
============ ============
Quality Bond Portfolio
Class A Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 200,766 $ 2,007,639
Shares issued to shareholders in
reinvestment of dividends 12,321 123,667
------------ ------------
Total issued 213,087 2,131,306
Shares redeemed. (14) (145)
------------ ------------
Net increase 213,073 $ 2,131,161
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
Quality Bond Portfolio
Class B Shares for the 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 B Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 310,972 $ 3,112,230
Shares issued to shareholders in
reinvestment of dividends 8,720 87,735
------------ ------------
Total issued. 319,692 3,199,965
Shares redeemed (23,377) (234,918)
------------ ------------
Net increase 296,315 $ 2,965,047
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class C Shares for the 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
============ ============
<PAGE>
Quality Bond Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 119,801 $ 1,200,962
Shares issued to shareholders in
reinvestment of dividends 2,715 27,344
------------ ------------
Total issued 122,516 1,228,306
Shares redeemed (13,729) (138,226)
------------ ------------
Net increase 108,787 $ 1,090,080
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
Quality Bond Portfolio
Class D Shares for the
Year Ended Dollar
January 31, 1997 Shares Amount
Shares sold. 29,757 $ 292,294
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,068 20,304
------------ ------------
Total issued 31,825 312,598
Shares redeemed (7,148) (70,042)
------------ ------------
Net increase 24,677 $ 242,556
============ ============
Quality Bond Portfolio
Class D Shares for the
Period February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold. 22,296 $ 223,184
Shares issued to shareholders in
reinvestment of dividends 764 7,677
------------ ------------
Total issued 23,060 230,861
Shares redeemed (2,180) (21,832)
------------ ------------
Net increase 20,880 $ 209,029
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
US Government Securities Portfolio
Class A Shares for the
Year Ended Dollar
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 A Shares for the
Period February 1, 1995++ to Dollar
January 31, 1996 Shares Amount
Shares sold 512,777 $ 5,133,291
Shares issued to shareholders in
reinvestment of dividends and
distributions 46,368 481,964
------------ ------------
Total issued 559,145 5,615,255
Shares redeemed (38,281) (400,291)
------------ ------------
Net increase 520,864 $ 5,214,964
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
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 B Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 316,580 $ 3,300,722
Shares issued to shareholders in
reinvestment of dividends and
distributions 8,754 79,114
------------ ------------
Total issued 325,334 3,379,836
Shares redeemed (35,474) (369,739)
------------ ------------
Net increase 289,860 $ 3,010,097
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class C Shares for the 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
============ ============
<PAGE>
US Government Securities Portfolio
Class C Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold 106,091 $ 1,106,574
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,930 26,407
------------ ------------
Total issued 109,021 1,132,981
Shares redeemed (5,619) (57,961)
------------ ------------
Net increase 103,402 $ 1,075,020
============ ============
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
US Government Securities Portfolio
Class D Shares for the 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
============ ============
US Government Securities Portfolio
Class D Shares for the Period Dollar
February 1, 1995++ to January 31, 1996 Shares Amount
Shares sold. 23,396 $ 243,530
Shares issued to shareholders in
reinvestment of dividends and
distributions 517 4,969
------------ ------------
Total issued. 23,913 248,499
Shares redeemed (7,179) (74,140)
------------ ------------
Net increase 16,734 $ 174,359
============ ============
<PAGE>
[FN]
++Prior to February 1, 1995 (commencement of operations), the
Portfolio issued 625 shares to MLAM for $6,250.
5. Commitments:
At January 31, 1997, the Global Opportunity Portfolio had entered
into foreign exchange contracts, in addition to the contracts listed
in the Schedule of Investments, under which it had agreed to sell a
foreign currency with an approximate value of $34,000.
6. Loaned Securities:
At January 31, 1997, the Quality Bond Portfolio held US Treasury
Notes having aggregate value of approximately $206,000, as
collateral for portfolio securities loaned having market value of
approximately $194,000.
7. 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.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Asset Builder Program, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of the
Fundamental Value, Global Opportunity, Growth Opportunity, Quality
Bond and US Government Securities Portfolios of the Merrill Lynch
Asset Builder Program, Inc. as of January 31, 1997, the related
statements of operations for the year then ended and changes in net
assets for the two year period then ended and the financial
highlights for the two year period then ended. These financial
statements and the financial highlights are the responsibility of
the Program's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based
on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at January
31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Fundamental Value, Global Opportunity, Growth Opportunity,
Quality Bond and US Government Securities Portfolios of the Merrill
Lynch Asset Builder Program, Inc. as of January 31, 1997, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
March 14, 1997
</AUDIT-REPORT>
