MERRILL LYNCH
CONVERTIBLE
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
February 28, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of
future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Statements and other information herein
are as dated and are subject to change.
Merrill Lynch
Convertible Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 10334 -- 2/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH CONVERTIBLE FUND, INC.
DEAR SHAREHOLDER
The three-month period ended February 28, 1998 was positive for US
stock market indexes. The Dow Jones Industrial Average (DJIA), the
Standard & Poor's 500 Index (S&P 500), the NASDAQ Composite Index and
the Russell 2000 Index had total returns of +9.70%, +10.25%, +10.62%
and +7.55%, respectively. During the same period, Merrill Lynch
Convertible Fund, Inc.'s Class A, Class B, Class C and Class D Shares
had total returns of +6.52%, +6.26%, +6.23% and +6.45%, respectively,
capturing most of the increases in stock prices. (Fund results shown
do not include sales charges and would be lower if sales charges were
included. Complete performance information, including average annual
and aggregate total returns, can be found on pages 4 and 5 of this
report to shareholders.)
These price improvements masked the sharp swings experienced during
the February quarter. The prices of the equity indexes declined
sharply from early December to a low that occurred in the second week
of January. This decline concluded in a dramatic increase in
volatility. The Volatility Index (VIX) reached its high of 35.4%
during the February quarter, coinciding with the short-term bottom in
stock prices. The Volatility Index reflects stock market implied
volatility based on the "at the money" quotes (quote where the strike
price and market price are the same) on the S&P 100 Index options.
This volatility measure, while still well below its record high of
55.5% on October 27, 1997, reflected abnormally high volatility
levels. This short-term low in stock prices and short-term high in
volatility reversed with equities rallying through the end of February
and volatility declining to more normal levels (the VIX ended the
period at 19.4%). Interest rates were benign during the February
quarter in a narrow range that was the inverse of stock prices.
Interest rates gently declined in December and early January on a
flight-to-quality move before increasing slightly as stocks recovered.
The stock market has been quite healthy since the advance off the
short-term lows made in January. Both the cumulative daily and weekly
advance/decline lines have made new highs coincident with new price
highs in most equity indexes. This is positive for equity prices in
the short term. The momentum of the move has also been constructive,
but the market is now becoming somewhat overbought, in our opinion.
Investor sentiment indicators are in bullish territory with most
investors expecting higher prices. However, complacency seems to be
high as well. Sentiment indicators are usually contrary indicators
since historically high bullish readings are signs of market tops,
whereas low bullish readings signify market bottoms. According to
Consensus Inc. and Market Vane, bullish opinion readings were 74% and
67%, respectively, at February quarter-end.
The valuation measures of the stock market indexes are currently at
extremely high levels, which is partially reflective of these high
sentiment readings, but also in response to low interest rates, low
inflation, high liquidity levels for individuals, positive
demographics and a healthy economic environment. For example, the
price/book value ratio on the DJIA at February quarter-end was a
record high 5.8. The dividend yield was a record low 1.65%, and the
price/earnings ratio was 22.2 times earnings. The S&P 500 also
reflected these extreme valuations, trading at 26 times earnings and
5.8 times book value and yielding 1.52%. Other major indexes displayed
this phenomenon as well. The S&P Industrial Average was trading at 29
times earnings and 7.3 times book value and 1.38% dividend yield. The
NASDAQ 100 was trading at 46.5 times earnings with a 0.10% dividend
yield, while the NASDAQ Composite Index was trading at 60.6 times
earnings with a yield of 0.41%.
Notwithstanding positive economic fundamentals and market conditions,
we believe that poor sentiment indicators and high valuation measures,
which already reflect this positive environment, suggest this is not a
low-risk entry point for equity investments. Accordingly, we
maintained low exposure to equities and continued to favor higher-
conversion premium, less equity-sensitive convertibles. Given the
positive fundamentals but high equity valuations, we believe this may
be an ideal time to cautiously participate in the equity market
through the use of convertible securities. Both Ibbotson Associates
and Merrill Lynch Convertibles Research have found that convertible
securities have historically captured most of the equity markets'
advances but with substantially lower standard deviations of returns
(a basic measure of risk). Convertibles have the potential to
outperform stocks during periods of flat or declining equity prices
since they are fixed-income instruments and offer higher current
yields.
During the quarter ended February 28, 1998, we established positions
in Mark IV Industries, Inc., an automobile parts manufacturer with
popular brands that include Purolator and Thermolase Corporation, an
innovative personal products company. We also purchased the
convertible bonds of Integrated Device Technology, Inc., a designer
and manufacturer of integrated circuits and modules, to our existing
position in the common stock. We added to our bond holdings in
Hometown Buffet Inc., a leading operator of buffet style restaurants,
Key Energy Group Inc., a provider of oilfield well services and Thermo
Instrument Systems Inc., a manufacturer of automobile components. We
eliminated our positions in homebuilders Continental Homes Holding
Corp. and Toll Brothers Inc., as well as the manufacturer Trinity
Industries, Inc.
In Conclusion
We thank you for your support of Merrill Lynch Convertible Fund, Inc.,
and we look forward to serving your investment needs in the months and
years ahead.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/DANIEL A. LUCHANSKY
Daniel A. Luchansky
Vice President and Portfolio Manager
April 6, 1998
PORTFOLIO INFORMATION
As of February 28, 1998
Percent of
Ten Largest Holdings Net Assets
BankAtlantic Bancorp, Inc.* 4.4%
Home Depot, Inc. (The), 3.25% due 10/01/2001 4.3
Pep Boys -- Manny, Moe & Jack (The)* 3.8
Key Energy Group Inc.* 3.1
Thermo Instrument Systems Inc.* 2.9
Citizens Utilities Trust, 5% 2.8
ALZA Corporation, 5% due 5/01/2006 2.7
Wendy's International, Inc., 5%, Series A 2.7
Integrated Health Services Inc., 6% due 1/01/2003 2.6
Cyprus Amax Minerals Co., $4.00, Series A 2.5
* Includes combined holdings.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
James H. Bodurtha, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Daniel A. Luchansky, Vice President
Barton A. Vogel, Vice President
Gerald M. Richard, Treasurer
Ira P. Shapiro, Secretary
Custodian
The Chase Manhattan Bank
Global Securities Services
Chase MetroTech Center
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] Class A Shares incur a maximum initial sales charge (front-
end load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
[bullet] 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. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to Class
D Shares after approximately 8 years. (There is no initial sales
charge for automatic share conversions.)
[bullet] Class C Shares 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.
[bullet] Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" table assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer
agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
<TABLE>
<CAPTION>
Recent Performance Results*
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Convertible Fund, Inc. Class A Shares+ +15.02% +6.52% +159.87%
ML Convertible Fund, Inc. Class B Shares -- +6.26 + 7.70
ML Convertible Fund, Inc. Class C Shares -- +6.23 + 7.75
ML Convertible Fund, Inc. Class D Shares -- +6.45 + 8.11
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was
included. Total investment returns are based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. The
Fund's inception dates are: Class A Shares, 8/02/85; and Class B, Class C and Class D Shares, 8/04/97.
+ Investment results for Class A Shares prior to August 4, 1997 reflect the performance of the Fund's Capital
Shares when the Fund was closed-end.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares+*
Year Ended 12/31/97 +14.03% +8.05%
Five Years Ended 12/31/97 +10.46 +9.27
Ten Years Ended 12/31/97 + 9.70 +9.11
+ Performance results for Class A Shares prior to August 4, 1997
reflect the performance of the Fund's Capital Shares when
the Fund was closed-end.
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge currently applicable to Class A Shares.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (8/04/97) through 12/31/97 +4.58% +1.58%
* 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 (8/04/97)
through 12/31/97 +4.63% +3.88%
* Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (8/04/97)
through 12/31/97 +4.90% -0.61%
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Convertible Fund, Inc. February 28, 1998
SCHEDULE OF INVESTMENTS
S&P Moody's Face Value
Industry Rating Rating Amount Convertible Debentures Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C>
Assisted Living -- NR* NR* $2,000,000 Assisted Living Concepts, Inc.,
2.5% 6% due 11/01/2002 $2,023,247 $2,122,500
Automotive Magna International Inc.:
Parts -- 10.7% A- NR* 1,000,000 4.875% due 2/15/2005 (d) 1,000,000 1,015,000
NR* Baa1 900,000 7.25% due 7/05/2005 772,368 891,903
BB+ Ba2 1,000,000 Mark IV Industries, Inc., 4.75%
due 11/01/2004 (d) 923,750 946,250
B+ B1 2,000,000 Mascotech, Inc., 4.50% due 12/15/2003 1,840,000 1,820,000
Pep Boys -- Manny, Moe & Jack (The):
BBB Baa3 2,500,000 4% due 9/01/1999 2,575,000 2,443,750
BBB Baa3 1,500,000 4.089% due 9/20/2011 (b) 871,424 825,000
Tower Automotive, Inc.:
B+ NR* 350,000 5% due 8/01/2004 364,000 384,125
B+ NR* 750,000 5% due 8/01/2004 (d) 750,000 823,125
------------ ------------
9,096,542 9,149,153
Aviation Equipment -- B- B3 1,000,000 Kellstrom Industries Inc., 5.75%
1.3% due 10/15/2002 (d) 1,000,000 1,083,750
Banking & BankAtlantic Bancorp, Inc.+:
Financial -- 4.4% NR* NR* 1,250,000 6.75% due 7/01/2006 2,152,413 2,437,500
NR* NR* 1,150,000 5.625% due 12/01/2007 1,156,875 1,299,500
------------ ------------
3,309,288 3,737,000
Conglomerates -- 2.0% NR* NR* 600,000 Polyphase Corporation, 12% due
7/01/1999+++ 600,000 402,000
A- Ba2 1,100,000 Thermo Electron Corporation, 4.25%
due 1/01/2003 1,270,500 1,298,000
------------ ------------
1,870,500 1,700,000
Drilling -- 1.1% A+ NR* 1,000,000 Loews Corp., 3.125% due 9/15/2007
(into Diamond Offshore
Drilling Inc.) 1,000,000 961,250
Energy -- 3.1% Key Energy Group Inc.+:
NR* NR* 200,000 7% due 7/01/2003 431,064 392,000
NR* NR* 2,750,000 5% due 9/15/2004 (d) 2,268,600 2,282,500
------------ ------------
2,699,664 2,674,500
Environmental -- A- NR* 1,605,000 Thermo Ecotek Corp., 4.875% due
4.8% 4/15/2004 (d) 1,606,119 1,911,956
A- NR* 750,000 Thermo Fibertek Inc., 4.50% due
7/15/2004 (d) 750,000 818,438
BBB- Ba2 1,250,000 USA Waste Services, Inc., 4% due
2/01/2002 1,274,375 1,409,375
------------ ------------
3,630,494 4,139,769
Healthcare B- B3 2,000,000 Integrated Health Services Inc.,
Services -- 4.4% 6% due 1/01/2003 1,880,000 2,200,000
BB- B1 1,300,000 PhyCor, Inc., 4.50% due 2/15/2003 1,209,000 1,233,375
BBB+ Ba1 400,000 Quantum Health Resources, Inc.,
4.75% due 10/01/2000 366,375 375,000
------------ ------------
3,455,375 3,808,375
Imaging A- NR* 700,000 ThermoTrex Corporation, 3.25% due
Systems -- 0.8% 11/01/2007 700,000 644,000
Medical Supplies -- NR* NR* 550,000 Phoenix Shannon PLC, 9.50% due
1.5% 11/01/2000 (d) (e) 299,857 66,000
A- NR* 1,350,000 Thermolase Corporation, 4.375% due
8/05/2004 (d) 1,214,433 1,201,500
------------ ------------
1,514,290 1,267,500
Office Supplies -- BB- Baa3 2,500,000 Office Depot, Inc., 4.891% due
4.4% 11/01/2008 (b) 1,489,153 1,793,750
US Office Products Co.:
B- B3 300,000 5.50% due 5/15/2003 269,250 258,375
B- B3 1,000,000 5.50% due 5/15/2003 842,500 842,000
B- B3 1,000,000 5.50% due 5/15/2003 (d) 942,500 861,250
------------ ------------
3,543,403 3,755,375
Pharmaceuticals -- BBB- Baa3 2,000,000 ALZA Corporation, 5% due 5/01/2006 2,031,875 2,335,000
2.7%
Precious Metals -- CCC+ B3 1,000,000 Coeur D'Alene Mines Corporation, 7.25%
1.0% due 10/31/2005 (d) 735,000 885,000
Real Estate Investment NR* B2 1,500,000 Capstone Capital Trust, Inc., 6.55%
Trusts -- 1.7% due 3/14/2002 1,377,667 1,449,375
Restaurants -- 2.9% B- B2 500,000 Boston Chicken, Inc., 7.75%
due 5/01/2004 465,000 347,500
B B2 1,985,000 Hometown Buffet Inc., 7%
due 12/01/2002 2,015,550 2,101,619
------------ ------------
2,480,550 2,449,119
Retail -- Building A+ A1 2,500,000 Home Depot, Inc. (The), 3.25% due
Materials -- 4.3% 10/01/2001+ 2,500,000 3,710,925
Scientific A- NR* 2,000,000 Thermo Cardiosystems, Inc., 4.75%
Equipment -- 6.7% due 5/15/2004 (d) 2,000,000 2,122,500
Thermo Instrument Systems Inc.:
A Baa2 1,250,000 4.50% due 10/15/2003 (d) 1,280,000 1,392,188
A- NR* 1,000,000 4% due 1/15/2005 1,000,000 1,065,000
A- Baa3 1,000,000 Thermo Optek Corp., 5% due
10/15/2000 (d) 1,035,000 1,121,250
------------ ------------
5,315,000 5,700,938
Semiconductors -- B NR* 750,000 Cypress Semiconductor Corp., 6%
1.8% due 10/01/2002 (d) 750,000 654,375
B- B2 1,000,000 Integrated Device Technology, Inc.,
5.50% due 6/01/2002 850,000 915,000
------------ ------------
1,600,000 1,569,375
Technology -- 2.9% NR* NR* 1,000,000 Apple Computer, Inc., 6% due 6/01/2001 950,000 1,027,500
B B3 750,000 Data General Corporation, 6% due
5/15/2004 750,000 781,875
NR* NR* 650,000 Premiere Technologies, Inc., 5.75%
due 7/01/2004+ (d) 650,000 715,813
------------ ------------
2,350,000 2,525,188
Textiles -- 1.0% B+ B1 1,000,000 Fieldcrest Cannon, Inc., 6%
due 3/15/2012 685,000 830,000
Water Treatment BB+ B1 1,750,000 US Filter Corp., 4.50% due 12/15/2001 1,750,000 1,920,625
Systems -- 2.2%
Total Convertible Debentures -- 68.2% 54,667,895 58,418,717
<CAPTION>
Shares
Held Convertible Preferred Stocks
<S> <C> <C> <C> <C> <C> <C>
Banking & NR* A1 10,000 Jefferson Pilot Corp. (ACESSM)
Financial -- 1.4% (into Nations Bank Corp.), 7.25% (c) 725,000 1,175,000
Energy -- 2.1% BB- Ba2 20,000 CalEnergy Capital Trust II, 6.25% (d) 1,000,000 902,500
B B3 20,000 Lomak Petroleum, Inc., 5.75% (d) 1,000,000 940,000
------------ ------------
2,000,000 1,842,500
Healthcare -- 0.8% BB- Baa3 50,000 Medpartners Inc., 6.50% 1,109,375 715,625
Mining -- 2.5% NR* Ba1 43,150 Cyprus Amax Minerals Co., $4.00,
Series A 2,312,840 2,135,925
Paper -- 2.4% BBB+ Baa1 40,000 International Paper Co., $5.25 1,902,000 2,040,000
Real Estate Investment BBB Baa3 30,000 Public Storage Inc., $2.062 (e) 759,300 1,567,500
Trusts -- 1.8%
Restaurants -- 2.7% BBB Baa2 45,000 Wendy's International, Inc., 5%,
Series A 2,305,938 2,328,750
Retail -- 2.3% BB- B1 34,500 Kmart Financing I, 7.75% 1,860,195 1,932,000
Steel -- 4.1% B Caa 40,000 WHX Corporation, 6.50%, Series A 1,590,840 1,970,000
A- A3 103,610 Worthington Industries, Inc., 7.25%
(into Rouge Industries, Inc.) 1,751,527 1,515,296
------------ ------------
3,342,367 3,485,296
Utilities -- 2.8% AA Aa3 50,500 Citizens Utilities Trust, 5% 2,191,905 2,398,750
Total Convertible Preferred
Stocks -- 22.9% 18,508,920 19,621,346
<CAPTION>
Shares Value
Industry Held Common Stocks Cost (Note 1a)
<S> <C> <C> <C> <C>
Banking & Financial -- 0.0% 1 Nal Acceptance Corp. (Warrants)(a)++ $0 $2,578
Consumer Products -- 1.0% 25,000 RJR Nabisco Holdings Corp. 821,875 864,063
Drug Distribution -- 0.4% 10,000 Bindley Western Industries, Inc. 191,850 331,250
Environmental -- 0.2% 6,000 Allied Waste Industries, Inc. (e) 28,804 129,000
Funeral Services -- 0.4% 10,000 Service Corporation International 183,039 378,750
Mining -- 0.8% 40,000 Inco Ltd. 729,276 707,500
Paper -- 0.7% 17,700 Boise Cascade Corporation 585,162 589,631
Pharmaceuticals -- 0.0% 2,182 Crescendo Pharmaceuticals Corporation 25,093 25,502
Semiconductors -- 1.9% 75,800 Cypress Semiconductor Corporation (e) 974,147 715,362
60,000 Integrated Device Technology, Inc. (e) 788,465 900,000
------------ ------------
1,762,612 1,615,362
Steel -- 0.9% 40,000 AK Steel Holding Corporation 601,549 747,500
Utilities -- 0.1% 5,652 Citizens Utilities Company (Class B) 51,095 52,988
Total Common Stocks -- 6.4% 4,980,355 5,444,124
<CAPTION>
Face
Amount Short-Term Securities
<S> <C> <C> <C> <C>
Commercial $1,933,000 General Motors Acceptance Corp.,
Paper** -- 2.3% 5.69% due 3/02/1998 1,932,083 1,932,083
Total Short-Term Securities -- 2.3% 1,932,083 1,932,083
Total Investments -- 99.8% $80,089,253 85,416,270
============
Short Sales (Proceeds -- $4,949,445) -- (6.7%)+ (5,709,644)
Other Assets Less Liabilities -- 6.9% 5,923,261
------------
Net Assets -- 100.0% $85,629,887
============
(a) Warrants entitle the Fund to purchase a predetermined number
of shares of Common Stock. The purchase price and number of
shares are subject to adjustment under certain conditions
until the expiration date.
(b) Represents a zero coupon or step bond; the interest rate shown
is the effective yield at the time of purchase by the Fund.
(c) Adjustable Convertible Extendable Securities.
(d) The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(e) Non-income producing security.
* Not Rated.
** Commercial Paper is traded on a discount basis; the interest
rate shown is the discount rate paid at the time of purchase
by the Fund.
+ Covered short sales entered into as of February 28, 1998 were
as follows:
Value
Shares Issue (Notes 1a & 1h)
179,500 BankAtlantic Bancorp, Inc. $(2,344,719)
40,000 Home Depot, Inc. (The) (2,552,500)
19,500 Key Energy Group Inc. (344,906)
5,500 Polyphase Corporation (4,469)
14,700 Premier Technologies, Inc. (463,050)
Total (Proceeds -- $4,949,445) $(5,709,644)
===========
++ Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $405,000,
representing 0.5% of net assets.
Acquisition Value
Issue Date Cost (Note 1a)
Nal Acceptance Corp.
(Warrants) 9/12/1996 $0 $2,578
Polyphase Corporation,
12% due 7/01/1999 7/05/1994 600,000 402,000
Total $600,000 $404,578
======== ========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of February 28, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $80,089,253) (Note 1a) $85,416,270
Cash 226
Deposits on short sales (Note 1h) 4,751,672
Receivables:
Securities sold $2,935,558
Capital shares sold 791,148
Interest 757,800
Dividends 105,690 4,590,196
-------------
Prepaid registration fees and other assets (Note 1f) 59,660
-------------
Total assets 94,818,024
-------------
Liabilities: Common stock sold short, at market value (proceeds -- $4,949,445)
(Notes 1a & 1h) 5,709,644
Payables:
Securities purchased 2,893,750
Capital shares redeemed 524,120
Investment adviser (Note 2) 38,522
Distributor (Note 2) 11,316
Short sales (Note 1h) 5,075 3,472,196
-------------
Accrued expenses and other liabilities 5,710
-------------
Total liabilities 9,188,137
-------------
Net Assets: Net assets $85,629,887
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $510,676
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 101,393
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized 18,448
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized 20,850
Paid-in capital in excess of par 78,463,386
Undistributed investment income -- net 397,522
Undistributed realized capital gains on investments -- net 1,550,725
Unrealized appreciation on investments -- net 4,566,887
-------------
Net assets $85,629,887
============
Net Asset Value: Class A -- Based on net assets of $67,166,710 and 5,106,762 shares outstanding $13.15
============
Class B -- Based on net assets of $13,301,312 and 1,013,934 shares outstanding $13.12
============
Class C -- Based on net assets of $2,421,403 and 184,482 shares outstanding $13.13
============
Class D -- Based on net assets of $2,740,462 and 208,502 shares outstanding $13.14
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations for the Six Months Ended February 28, 1998
<S> <C> <C> <C>
Investment Income Interest and discount earned $1,857,781
(Notes 1d & 1e): Dividends 646,884
----------
Total income 2,504,665
----------
Expenses: Investment advisory fees (Note 2) $269,128
Professional fees 71,167
Accounting services (Note 2) 51,510
Account maintenance and distribution fees -- Class B (Note 2) 42,540
Printing and shareholder reports 37,184
Transfer agent fees -- Class A (Note 2) 34,942
Directors' fees and expenses 26,837
Registration fees (Note 1f) 23,870
Custodian fees 9,011
Interest on securities sold short 7,593
Dividends on securities sold short 7,075
Account maintenance and distribution fees -- Class C (Note 2) 6,901
Transfer agent fees -- Class B (Note 2) 4,607
Account maintenance fees -- Class D (Note 2) 2,150
Transfer agent fees -- Class D (Note 2) 806
Pricing services 784
Transfer agent fees -- Class C (Note 2) 773
Other 5,440
----------
Total expenses 602,318
----------
Investment income -- net 1,902,347
----------
Realized & Realized gain (loss) from:
Unrealized Gain Investments -- net 2,670,700
(Loss) on Foreign currency transactions -- net (1,468) 2,669,232
Investments & ----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions -- Net Investments -- net 365,685
(Notes 1b, 1c, Foreign currency transactions -- net 94 365,779
1e & 3) ------------ -----------
Net realized and unrealized gain on investments and
foreign currency transactions 3,035,011
----------
Net Increase in Net Assets Resulting from Operations $4,937,358
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the For the
Months Period Year
Ended Jan. 1, 1997 Ended
Feb. 28, to Aug. 31, Dec. 31,
Increase (Decrease) in Net Assets: 1998 1997 1996
<S> <C> <C> <C> <C>
Operations: Investment income -- net $1,902,347 $8,745,876 $14,105,139
Realized gain on investments and foreign currency
transactions -- net 2,669,232 50,580,734 19,882,034
Income taxes on realized gain on investments -- -- (4,841,320)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions -- net 365,779 (31,783,237) 17,386,219
------------ ------------ -----------
Net increase in net assets resulting from operations 4,937,358 27,543,373 46,532,072
------------ ------------ -----------
Dividends & Investment income -- net:
Distributions to Class A (1,935,219) -- --
Shareholders Class B (157,652) -- --
(Note 1g): Class C (24,527) -- --
Class D (32,775) -- --
Income Shares -- (8,134,631)+ (14,192,493)+
Realized gain on investments -- net:
Class A (28,338,343) -- (7,473,704)++
Class B (939,688) -- --
Class C (147,966) -- --
Class D (182,527) -- --
------------ ------------ -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (31,758,697) (8,134,631) (21,666,197)
------------ ------------ -----------
Capital Share Net decrease in net assets from capital share transactions (5,850,463) (190,895,600) --
Transactions Offering costs resulting from issuance of new
(Note 4): classes of shares (14,326) (190,000) --
------------ ------------ -----------
Net decrease in net assets derived from capital share
transactions (5,864,789) (191,085,600) --
------------ ------------ -----------
Net Assets: Total increase (decrease) in net assets (32,686,128) (171,676,858) 24,865,875
Beginning of period 118,316,015 289,992,873 265,126,998
------------ ------------ -----------
End of period* $85,629,887 $118,316,015 $289,992,873
=========== ============ ===========
* Undistributed investment income -- net $397,522 $645,348 $128,996
=========== ============ ===========
+ Dividends from investment income -- net during this time period reflect when the Fund was a
dual-structure closed-end management investment company. All dividends were paid to Income Shareholders.
Such shares were redeemed on July 31, 1997.
++ Formerly Capital Shares.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Convertible Fund, Inc. February 28, 1998
Financial Highlights
Class A++++++
The following per share data and ratios have been For the For the
derived from information provided in the financial Six Months Period
statements. Ended Jan. 1, 1997 For the Year Ended December 31,
Feb. 28, to Aug. 31,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $17.36 $15.57 $13.43 $11.13 $13.21 $12.87
Operating ------- -------- -------- -------- ------- --------
Performance:+++ Investment income -- net .29 .06 -- -- -- --
Realized and unrealized gain (loss)
on investments and foreign currency
transactions -- net .45 1.75 2.78 2.66 (2.12) 1.43
------- -------- -------- -------- ------- --------
Total from investment operations .74 1.81 2.78 2.66 (2.12) 1.43
------- -------- -------- -------- ------- --------
Less dividends and distributions:
Investment income -- net (.33) -- -- -- -- --
Realized gain on investments --
net (4.62) -- (.64) (.36) (.01) (1.17)
------- -------- -------- -------- ------- --------
Total dividends and distributions (4.95) -- (.64) (.36) (.01) (1.17)
------- -------- -------- -------- ------- --------
Effect of repurchase of Treasury
Stock -- -- -- --+ .05 .08
------- -------- -------- -------- ------- --------
Capital charge resulting from
issuance of new classes of shares --+ (.02) -- -- -- --
------- -------- -------- -------- ------- --------
Net asset value, end of period $13.15 $17.36 $15.57 $13.43 $11.13 $13.21
------- -------- -------- -------- ------- --------
Total Investment Based on net asset value per share 5.48%++++ 11.50%++++ 20.60% 24.44% (15.68%) 13.94%
Return:** ------- -------- -------- -------- ------- --------
Ratios to Average Expenses*** 1.22%* .90%* .78% .79% .87% .80%
Net Assets: ------- -------- -------- -------- ------- --------
Investment income -- net 4.39%* 4.76%* 4.98% 5.40% 5.43% 5.10%
------- -------- -------- -------- ------- --------
Supplemental Net assets, end of period
Data: (in thousands) $67,167 $110,178 $289,993 $265,127 $238,46 $274,999
------- -------- -------- -------- ------- --------
Portfolio turnover 76.07% 92.86% 129.06% 87.69% 69.37% 116.03%
------- -------- -------- -------- ------- --------
Average commission rate paid++ $.0549 $.0522 $.0447 -- -- --
------- -------- -------- -------- ------- --------
* Annualized.
** Total investment returns exclude the effects of sales loads. Performance results prior to August 4, 1997
are for when the Fund was a dual-structure closed-end management investment company and include only the
returns for the Capital Shares but exclude results from the Income Shares.
*** Excluding taxes on undistributed net realized long-term capital gains for years prior to the period
January 1, 1997 to August 31, 1997.
+ Amount is less than $.01 per share.
++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average
commission rate per share for purchases and sales of equity securities.
+++ Excludes the effect of per share operating performance of the Fund's Income Shares, which were redeemed
on July 31, 1997. Per share operating performance prior to the period January 1, 1997 to August 31, 1997
reflects when the Fund was a dual-structure closed-end management investment company. For the period
January 1, 1997 to July 31, 1997, investment income -- net per Income Share was $0.73 and dividends of
investment income -- net per Income Share were $0.70.
++ Based on average shares outstanding.
++++ Aggregate total investment return.
++++++ Formerly Capital Shares.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class B++++
For the For the
Six Period
Months Aug. 4,
The following per share data and ratios have been derived Ended 1997+ to
from information provided in the financial statements. Feb. 28, Aug. 31,
Increase (Decrease) in Net Asset Value: 1998 1997
<S> <C> <C> <C>
Per Share Net asset value, beginning of period $17.35 $16.91
Operating Investment income -- net .20 .05
Performance: Realized and unrealized gain on investments and foreign currency
transactions -- net .47 .39
------- ------
Total from investment operations .67 .44
------- ------
Less dividends and distributions:
Investment income -- net (.28) --
Realized gain on investments -- net (4.62) --
------- ------
Total dividends and distributions (4.90) --
------- ------
Net asset value, end of period $13.12 $17.35
------- ------
Total Investment Based on net asset value per share 4.96%++ 2.60%++
Return:** ------- ------
Ratios to Average Expenses 2.27%* 2.66%*
Net Assets: ------- ------
Investment income -- net 3.13%* 3.77%*
------- ------
Supplemental Net assets, end of period (in thousands) $13,301 $5,759
Data: ------- ------
Portfolio turnover 76.07% 92.86%
------- ------
Average commission rate paid $.0549 $.0522
------- ------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class C++++
For the For the
Six Period
Months Aug. 4,
The following per share data and ratios have been derived Ended 1997+ to
from information provided in the financial statements. Feb. 28, Aug. 31,
Increase (Decrease) in Net Asset Value: 1998 1997
<S> <C> <C> <C>
Per Share Net asset value, beginning of period $17.36 $16.91
Operating ------ ------
Performance: Investment income -- net .19 .05
Realized and unrealized gain on investments and foreign currency
transactions -- net .48 .40
------ ------
Total from investment operations .67 .45
------ ------
Less dividends and distributions:
Investment income -- net (.28) --
Realized gain on investments -- net (4.62) --
------ ------
Total dividends and distributions (4.90) --
------ ------
Net asset value, end of period $13.13 $17.36
------ ------
Total Investment Based on net asset value per share 4.95%++ 2.66%++
Return:** ------ ------
Ratios to Average Expenses 2.27%* 2.74%*
Net Assets: ------ ------
Investment income -- net 3.18%* 3.58%*
------ ------
Supplemental Net assets, end of period (in thousands) $2,421 $1,014
Data: ------ ------
Portfolio turnover 76.07% 92.86%
------ ------
Average commission rate paid $.0549 $.0522
------ ------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class D++++
For the For the
Six Period
Months Aug. 4,
The following per share data and ratios have been derived Ended 1997+ to
from information provided in the financial statements. Feb. 28, Aug. 31,
Increase (Decrease) in Net Asset Value: 1998 1997
<S> <C> <C> <C>
Per Share Net asset value, beginning of period $17.36 $16.91
Operating ------ ------
Performance: Investment income -- net .24 .07
Realized and unrealized gain on investments and foreign currency
transactions -- net .47 .38
------ ------
Total from investment operations .71 .45
------ ------
Less dividends and distributions:
Investment income -- net (.31) --
Realized gain on investments -- net (4.62) --
------ ------
Total dividends and distributions (4.93) --
------ ------
Net asset value, end of period $13.14 $17.36
------ ------
Total Investment Based on net asset value per share 5.30%++ 2.66%++
Return:** ------ ------
Ratios to Average Expenses 1.50%* 1.92%*
Net Assets: ------ ------
Investment income -- net 3.89%* 4.81%*
------ ------
Supplemental Net assets, end of period (in thousands) $2,741 $1,365
Data: ------ ------
Portfolio turnover 76.07% 92.86%
------ ------
Average commission rate paid $.0549 $.0522
------ ------
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Aggregate total investment return.
++++ Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Convertible Fund, Inc. February 28, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Convertible Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, open-end
management investment company. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature. The
Fund offers four classes of shares under the Merrill Lynch Select
PricingSM 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 bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Portfolio securities which are traded
on stock exchanges are valued at the last sale price 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 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 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 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 value
quotations are not readily available are valued at their fair value as
determined in good faith by or under the direction of the Fund's Board
of Directors.
(b) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
[bullet] Financial futures contracts -- The Fund may purchase or sell
financial futures and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and
are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
[bullet] Options -- The Fund is authorized to write and purchase call
and put options. When the Fund writes an option, an amount equal to
the premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
When a security is purchased or sold through an exercise of an option,
the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the
proceeds of the security sold. When an option expires (or the Fund
enters into a closing transaction), the Fund realizes a gain or loss
on the option to the extent of the premiums received or paid (or 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.
[bullet] Forward foreign exchange contracts -- The Fund is 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 Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
[bullet] Foreign currency options and futures -- The Fund is also
authorized to 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 Fund, sold by the Fund but not yet delivered,
or committed or anticipated to be purchased by the Fund.
(c) Foreign currency transactions -- Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or valuing
(unrealized) assets or liabilities expressed in foreign currencies
into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on
investments.
(d) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
(e) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-dividend
dates. 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) Prepaid registration fees -- Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) Short sales -- When the Fund engages in a short sale, an amount
equal to the proceeds received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the market value of the short
sale. The Fund maintains a segregated account of securities as
collateral for the short sales. The Fund is exposed to market risk
based on the amount, if any, that the market value of the stock
exceeds the market value of the securities in the segregated account.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund 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 Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributors, Inc. ("MLFD"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at the annual rate of 0.60% of
the average daily net assets of the Fund.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also
provides account maintenance and distribution services to the Fund.
The ongoing account maintenance fee compensates the Distributor and
MLPF&S for providing account maintenance services to Class B, Class C
and Class D shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B and Class C shareholders.
For the six months ended February 28, 1998, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer concessions
on sales of the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $2,589 $4,757
Class D $2,713 $36,786
For the six months ended February 28, 1998, MLPF&S received contingent
deferred sales charges of $24,973 and $1,853 relating to transactions
in Class B and Class C Shares, respectively.
In addition, MLPF&S received $21,621 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended February 28, 1998.
During the six months ended February 28, 1998, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $561 for
security price quotations to compute the net asset value of the Fund.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 28, 1998 were $63,474,584 and
$65,818,650, respectively.
Net realized gains (losses) for the six months ended February 28, 1998
and net unrealized gains (losses) as of February 28, 1998 were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $2,832,997 $5,327,017
Short-term investments (346) --
Short sales (161,951) (760,199)
Foreign currency
transactions (1,468) 69
---------- ----------
Total $2,669,232 $4,566,887
========== ==========
As of February 28, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $5,327,017, of which $7,654,002 related
to appreciated securities and $2,326,985 related to depreciated
securities. The aggregate cost of investments at February 28, 1998 for
Federal income tax purposes was $80,089,253.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$5,864,789 and $191,085,600 for the six months ended February 28, 1998
and for the period January 1, 1997 to August 31, 1997, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
February 28, 1998 Shares Amount
Shares sold 188,123 $2,436,284
Shares issued to shareholders
in reinvestment of dividends
and distributions 810,769 10,502,646
Total issued 998,892 12,938,930
Shares redeemed (2,238,551) (29,878,955)
---------- ------------
Net decrease (1,239,659) $(16,940,025)
========== ============
Class A Shares for the
Period January 1, 1997 Dollar
to August 31, 1997 Shares Amount
Shares sold 45,211 $774,119
Shares redeemed (5,352,490) (91,314,601)
---------- ------------
Net decrease (5,307,279) $(90,540,482)
========== ============
Class B Shares for the
Six Months Ended Dollar
February 28, 1998 Shares Amount
Shares sold 787,223 $10,174,167
Shares issued to shareholders
in reinvestment of dividends
and distributions 76,312 984,129
---------- ------------
Total issued 863,535 11,158,296
Shares redeemed (181,465) (3,055,462)
---------- ------------
Net increase 682,070 $8,102,834
========== ============
Class B Shares for the
Period August 4, 1997+ Dollar
to August 31, 1997 Shares Amount
Shares sold 347,816 $5,946,236
Shares redeemed (15,952) (272,208)
---------- ------------
Net increase 331,864 $5,674,028
========== ============
+ Commencement of operations.
Class C Shares for the
Six Months Ended Dollar
February 28, 1998 Shares Amount
Shares sold 156,631 $2,055,838
Shares issued to shareholders
in reinvestment of dividends
and distributions 11,912 153,615
---------- ------------
Total issued 168,543 2,209,453
Shares redeemed (42,473) (706,576)
---------- ------------
Net increase 126,070 $1,502,877
========== ============
Class C Shares for the
Period August 4, 1997+ Dollar
to August 31, 1997 Shares Amount
Shares sold 59,874 $1,024,877
Shares redeemed (1,462) (25,410)
---------- ------------
Net increase 58,412 $999,467
========== ============
+ Commencement of operations.
Class D Shares for the
Six Months Ended Dollar
February 28, 1998 Shares Amount
Shares sold 170,752 $2,216,873
Shares issued to shareholders
in reinvestment of dividends
and distributions 13,888 179,305
---------- ------------
Total issued 184,640 2,396,178
Shares redeemed (54,762) (912,327)
---------- ------------
Net increase 129,878 $1,483,851
========== ============
Class D Shares for the
Period August 4, 1997+ Dollar
to August 31, 1997 Shares Amount
Shares sold 96,058 $1,653,202
Shares redeemed (17,434) (302,405)
---------- ------------
Net increase 78,624 $1,350,797
========== ============
+ Commencement of operations.
In addition, on July 31, 1997, all 11,653,700 Income Shares were
redeemed amounting to $108,379,410.
