(MONEY Magazine) – It sounds like pie in the sky, but it isn't: a junk bond's yield without a junk bond's risk. The investment is Gemini II income shares, which pay more than 12%. ''For safety, they're the next best thing to a CD,'' says Steven Samuels, a Sherman Oaks, Calif. money manager. Gemini II, a dual-purpose closed-end fund managed by John Neff, who also runs the well-known Windsor Fund, consists of two types of shares that trade on the NYSE. The so-called capital shares participate in the gains or losses on the fund's portfolio of bonds and high-yield stocks; the preferred, or income shares, get the regular dividends and interest. As you might expect, there is a catch: the income shares, which recently traded at $13 each, will be redeemed in January 1997 for only $9.30. Nonetheless, they are a terrific bargain, says Ron Olin, president of the Houston investment firm Deep Discount Advisors. According to Olin's calculations, the income shares' future dividend payments plus their $9.30 redemption value are worth at least $15.70. Or in other words, the shares will provide a 12% yield to maturity -- 3.5 percentage points more than the yield of a comparable high-quality bond.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: Gemini II