MERRILL LYNCH
STRATEGIC
DIVIDEND FUND
FUND LOGO
Quarterly Report
October 31, 1996
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the 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.
<PAGE>
Merrill Lynch
Strategic Dividend Fund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH STRATEGIC DIVIDEND FUND
Officers and
Trustees
Arthur Zeikel, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Richard R. West, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Walter D. Rogers, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, Massachusetts 02171
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
DEAR SHAREHOLDER
Investor perceptions regarding the direction of the US economy
shifted over the course of the three-month period ended October 31,
1996. As the quarter began, concerns of an overheating economy and
spiraling inflation dominated the financial markets as investors
focused on the increasing possibility of monetary policy tightening
by the Federal Reserve Board. However, as it became apparent that
inflationary pressures were still under control--and when the
Federal Reserve Board did not tighten monetary policy at its
September 24 meeting--the investment outlook became more positive.
These developments, coupled with several economic data releases that
showed growth was at or below expectations, helped to assuage
investors' concerns about an overheating economy. Stock and bond
prices improved, with most broad-based stock market averages
reaching historic high levels. However, one factor potentially
overshadowing investor enthusiasm is the possibility that corporate
profits may have peaked for this economic cycle.
The US economy clearly has slowed from its strong growth rate during
the first half of 1996. Gross domestic product growth is slowing,
labor-cost pressures are subsiding, consumer confidence is easing,
and commodity prices are dropping. Investors are also anticipating
that President Clinton's re-election, combined with continued
Republican majorities in the House of Representatives and the
Senate, will prove positive for the nation's budget deficit. As 1996
draws to a close, investors are likely to continue to focus on the
economy. Evidence of continued growth at a non-inflationary pace
would be positive for the US capital markets.
<PAGE>
Portfolio Matters
For the three months ended October 31, 1996, Merrill Lynch Strategic
Dividend Fund's Class A, Class B, Class C and Class D Shares
provided total returns of +9.95%, +9.55%, +9.55% and +9.79%,
respectively. (Results shown do not reflect sales charges; results
would be lower if sales charges were included. For complete
performance information, see pages 4--6 of this report to
shareholders.) While the Fund's performance lagged the +10.85% total
return of the unmanaged Standard & Poor's 500 Index (S&P 500) for
the three-month period, it significantly outperformed the +6.57%
total return of the 200 highest-yielding stocks in the S&P 500. The
Fund's primary investment focus is on stocks whose yields are
greater than the yield of the S&P 500. At October quarter-end, more
than 90% of the Fund's equity holdings had dividend yields above the
yield of the S&P 500, with a gross weighted yield (by dollars
invested) of 3.8%, compared to the 2.1% yield for the S&P 500.
In spite of the significant underperformance of higher-yielding
stocks relative to the overall stock market this year, we continued
to focus our investment activities on high dividend yield stocks. In
our opinion, this universe of stocks offers attractive investment
opportunities on a selective basis. As a result, we increased our
investments in the consumer, financial and telecommunications
sectors. The Fund's heaviest investment exposure continued to be in
the three highest-yielding stock sectors: utilities, financials and
energy stocks, which accounted for 60% of net assets.
By October quarter-end, we held investments in 68 companies,
unchanged from the number of holdings at the end of the July
quarter. During the October quarter, we eliminated five holdings
from the Fund. These included Boatmen's Bancshares, Inc., in which
we realized a significant capital gain after the company agreed to
be acquired by NationsBank Corporation; Lance, Inc. and McGraw-Hill
Companies, Inc., which we believed offered less attractive upside
potential; and Cyprus Amax Minerals Co. and Worthington Industries,
Inc. because they no longer were likely to achieve our price
objectives. In addition, we increased our position in Edison
International. We also added one stock to the utility sector (AT&T
Corp.), two to the financial sector (Essex Property Trust, Inc. and
PaineWebber Group Inc.), and two in the consumer sector (Philip
Morris Companies, Inc. and Tambrands Inc.).
Over the past year, AT&T Corp. has undergone a major restructuring
which involved the divestiture of most of its non-telephone
businesses, and chose a successor to the current chairman and CEO
from outside the company. The stock declined sharply over the past
year, reflecting uncertainty surrounding the new competitive
environment in the telecommunications market. We believe the current
valuation on the stock is very attractive, particularly when
measured on a historical basis.
<PAGE>
Essex Property Trust, Inc. is a real estate investment trust (REIT)
with a focus on middle-income apartment complexes on the West Coast
of the United States. We believe Essex is well-positioned to benefit
from the improving real estate market and economy in California
where most of its properties are located. Strong internal growth
plus acquisitions may generate strong profits.
PaineWebber Group Inc. is one of the largest full-service brokerage
firms in the United States. We believe that well-controlled costs,
an improving revenue stream and a fairly aggressive share repurchase
program all point to higher earnings in the quarters ahead.
Philip Morris Companies, Inc. is the largest cigarette company in
the world and a major food and beer producer. We expect profits to
continue to grow at a double-digit rate, as the company continues to
grow its international market share and volumes in the tobacco
business. Recent investor reaction to negative publicity has caused
the share price to drop to a significant discount to the market's
price/earnings multiple, creating an attractive buying opportunity.
Late in the October quarter, the management of Tambrands Inc., the
leading manufacturer and marketer of feminine hygiene products
domestically and internationally, announced a major restructuring
program which should begin to benefit earnings next year. With
management's commitment to improve profitability and the currently
attractive valuation of the stock, the shares looked attractive
based on their total return potential.
In Conclusion
We thank you for your investment in Merrill Lynch Strategic Dividend
Fund, and we look forward to reviewing our outlook and strategy with
you again in our upcoming semi-annual report.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Walter D. Rogers)
Walter D. Rogers
Vice President and Portfolio Manager
<PAGE>
November 22, 1996
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund 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. 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. 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.)
* 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.
* 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. 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.
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
11/29/88--12/31/88 $10.71 $10.56 $0.140 $0.156 + 1.37%
1989 10.56 12.50 -- 0.612 +24.61
1990 12.50 10.95 -- 0.725 - 6.70
1991 10.95 12.15 -- 0.516 +15.99
1992 12.15 12.75 -- 0.460 + 8.95
1993 12.75 12.74 0.645 0.456 + 8.66
1994 12.74 10.70 1.596 0.465 + 0.17
1995 10.70 12.22 1.309 0.463 +32.08
1/1/96--10/31/96 12.22 12.30 1.105 0.418 +13.34
------ ------
Total $4.795 Total $4.271
Cumulative total return as of 10/31/96: +142.68%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
11/25/87--12/31/87 $10.00 $10.02 -- $0.047 + 0.67%
1988 10.02 10.56 $0.266 0.465 +12.81
1989 10.56 12.49 -- 0.504 +23.40
1990 12.49 10.94 -- 0.604 - 7.68
1991 10.94 12.14 -- 0.393 +14.78
1992 12.14 12.75 -- 0.328 + 7.89
1993 12.75 12.74 0.645 0.315 + 7.54
1994 12.74 10.71 1.596 0.333 - 0.82
1995 10.71 12.24 1.309 0.330 +30.73
1/1/96--10/31/96 12.24 12.30 1.105 0.315 +12.26
------ ------
Total $4.921 Total $3.634
<PAGE>
Cumulative total return as of 10/31/96: +150.81%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $11.84 $10.69 $0.798 $0.108 - 2.02%
1995 10.69 12.17 1.309 0.358 +30.59
1/1/96--10/31/96 12.17 12.22 1.105 0.323 +12.31
------ ------
Total $3.212 Total $0.789
Cumulative total return as of 10/31/96: +43.69%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $11.85 $10.71 $0.798 $0.115 - 1.88%
1995 10.71 12.22 1.309 0.439 +31.69
1/1/96--10/31/96 12.22 12.29 1.105 0.395 +13.05
------ ------
Total $3.212 Total $0.949
Cumulative total return as of 10/31/96: +46.07%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
10/31/96 7/31/96 10/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Strategic Dividend Fund Class A Shares* $12.30 $12.43 $11.57 +18.26%(1) + 7.95%(2)
ML Strategic Dividend Fund Class B Shares* 12.30 12.44 11.56 +18.34(1) + 7.85(2)
ML Strategic Dividend Fund Class C Shares* 12.22 12.37 11.52 +18.05(1) + 7.82(2)
ML Strategic Dividend Fund Class D Shares* 12.29 12.43 11.57 +18.16(1) + 7.86(2)
Standard & Poor's 500 Index** 705.27 639.95 581.50 +21.28 +10.21
ML Strategic Dividend Fund Class A Shares--Total Return* +23.65(3) + 9.95(4)
ML Strategic Dividend Fund Class B Shares--Total Return* +22.39(5) + 9.55(6)
ML Strategic Dividend Fund Class C Shares--Total Return* +22.29(7) + 9.55(8)
ML Strategic Dividend Fund Class D Shares--Total Return* +23.29(9) + 9.79(10)
Standard & Poor's 500 Index--Total Return** +24.07 +10.85
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**An unmanaged broad-based index comprised of common stocks. Total
investment returns for unmanaged indexes are based on estimates.
(1)Percent change includes reinvestment of $1.343 per share capital
gains distributions.
(2)Percent change includes reinvestment of $1.105 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.578 per share ordinary
income dividends and $1.343 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.245 per share ordinary
income dividends and $1.105 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.437 per share ordinary
income dividends and $1.343 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.209 per share ordinary
income dividends and $1.105 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.455 per share ordinary
income dividends and $1.343 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.212 per share ordinary
income dividends and $1.105 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.552 per share ordinary
income dividends and $1.343 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.237 per share
ordinary income dividends and $1.105 per share capital gains
distributions.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/96 +18.60% +12.37%
Five Years Ended 9/30/96 +12.27 +11.06
Inception (11/29/88) through 9/30/96 +11.50 +10.74
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/96 +17.40% +13.40%
Five Years Ended 9/30/96 +11.11 +11.11
Inception (11/25/87) through 9/30/96 +10.55 +10.55
[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 9/30/96 +17.41% +16.41%
Inception (10/21/94) through 9/30/96 +18.55 +18.55
[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 9/30/96 +18.26% +12.05%
Inception (10/21/94) through 9/30/96 +19.49 +16.22
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
EUROPE Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Netherlands Oil--International 16,800 Royal Dutch Petroleum PLC
(NY Registered Shares) $ 982,387 $ 2,778,300 1.6%
Total Investments in the Netherlands 982,387 2,778,300 1.6
Spain Oil & Gas Producers 50,000 Repsol S.A. (ADR)* 1,597,265 1,631,250 1.0
Total Investments in Spain 1,597,265 1,631,250 1.0
United Kingdom Oil--International 19,000 British Petroleum Co. PLC (ADR)* 1,676,727 2,443,875 1.5
Total Investments in the
United Kingdom 1,676,727 2,443,875 1.5
Total Investments in Europe 4,256,379 6,853,425 4.1
NORTH
AMERICA
United States Aerospace & Defense 40,000 Northrop Grumman Corp. 1,435,901 3,230,000 1.9
30,000 TRW Inc. 1,663,737 2,715,000 1.6
------------ ------------ ------
3,099,638 5,945,000 3.5
Automobiles 85,000 Ford Motor Company 2,416,975 2,656,250 1.6
50,000 General Motors Corp. 2,421,750 2,693,750 1.6
------------ ------------ ------
4,838,725 5,350,000 3.2
Automotive Equipment 72,000 Arvin Industries, Inc. 1,656,934 1,647,000 1.0
60,000 Dana Corp. 1,649,850 1,777,500 1.1
------------ ------------ ------
3,306,784 3,424,500 2.1
Banks 20,000 Bankers Trust New York Corp. 1,418,062 1,690,000 1.0
40,000 Barnett Banks, Inc. 1,002,350 1,525,000 0.9
74,000 CoreStates Financial Corp. 2,584,814 3,598,250 2.1
26,000 First Commerce Corp. 832,910 923,000 0.6
23,000 Mellon Bank Corp. 990,205 1,497,875 0.9
23,000 Mercantile Bancorp. 1,002,055 1,141,375 0.7
------------ ------------ ------
7,830,396 10,375,500 6.2
<PAGE>
Chemicals 23,000 The Dow Chemical Co. 1,369,880 1,788,250 1.1
30,700 du Pont (E.I.) de Nemours & Co. 2,060,442 2,847,425 1.7
------------ ------------ ------
3,430,322 4,635,675 2.8
Cosmetics & Household 34,000 Avon Products, Inc. 1,009,895 1,844,500 1.1
Products 42,000 The Clorox Co. 2,495,107 4,583,250 2.7
------------ ------------ ------
3,505,002 6,427,750 3.8
Drugs 40,000 American Home Products Corp. 2,125,575 2,450,000 1.5
40,000 Bristol-Myers Squibb Co. 1,826,550 4,230,000 2.5
35,000 Eli Lilly & Co. 951,993 2,467,500 1.5
------------ ------------ ------
4,904,118 9,147,500 5.5
Electrical Equipment 38,600 General Electric Co. 1,864,814 3,734,550 2.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Financial Services 60,000 Beneficial Corp. $ 2,305,713 $ 3,510,000 2.1%
(concluded) 30,000 PaineWebber Group Inc. 713,100 705,000 0.4
------------ ------------ ------
3,018,813 4,215,000 2.5
Insurance 95,000 American General Corp. 1,961,793 3,538,750 2.1
50,000 Lincoln National Corp. 2,135,530 2,425,000 1.4
110,000 Ohio Casualty Corp. 3,512,187 3,575,000 2.1
------------ ------------ ------
7,609,510 9,538,750 5.6
Machinery 70,800 The Manitowoc Company, Inc. 1,306,732 2,371,800 1.4
Metals 55,000 Carpenter Technology Corp. 1,747,599 1,794,375 1.1
Miscellaneous 28,000 Minnesota Mining & Manufacturing Co. 1,608,098 2,145,500 1.3
Technology
Oil--Domestic 14,000 Atlantic Richfield Co. 1,584,596 1,855,000 1.1
50,000 Occidental Petroleum Corp. 1,318,625 1,225,000 0.7
62,000 Phillips Petroleum Co. 2,146,570 2,542,000 1.5
50,000 Ultramar Corp. 1,578,500 1,431,250 0.8
------------ ------------ ------
6,628,291 7,053,250 4.1
<PAGE>
Oil--International 40,000 Exxon Corp. 2,379,692 3,545,000 2.1
20,000 Mobil Corp. 915,150 2,335,000 1.4
30,000 Texaco Inc. 1,407,728 3,048,750 1.8
------------ ------------ ------
4,702,570 8,928,750 5.3
Paper & Forest 60,000 Weyerhaeuser Co. 2,666,100 2,752,500 1.6
Products
Personal Care Products 30,000 Tambrands Inc. 1,317,486 1,278,750 0.8
Photography 40,000 Eastman Kodak Co. 1,624,689 3,190,000 1.9
Real Estate 40,000 Avalon Properties, Inc. 840,138 925,000 0.5
Investment Trusts 35,000 Essex Property Trust, Inc. 867,275 905,625 0.5
30,000 Patriot American Hospitality Inc. 716,256 1,053,750 0.6
------------ ------------ ------
2,423,669 2,884,375 1.6
Retail 50,000 J.C. Penney Company Inc. 2,315,950 2,625,000 1.6
29,000 May Department Stores Co. 1,140,994 1,373,875 0.8
------------ ------------ ------
3,456,944 3,998,875 2.4
Savings & Loan 80,000 Great Western Financial Corporation 1,685,600 2,240,000 1.3
Tobacco 18,000 Philip Morris Companies, Inc. 1,715,580 1,667,250 1.0
Utilities--Electric 85,000 American Electric Power Co., Inc. 2,682,600 3,527,500 2.1
106,000 Boston Edison Company 2,656,360 2,544,000 1.5
126,000 Consolidated Edison Co. of
New York, Inc. 3,559,500 3,685,500 2.2
105,000 Edison International 1,759,425 2,073,750 1.2
100,000 Houston Industries Inc. 1,934,250 2,287,500 1.4
40,000 IPALCO Enterprises, Inc. 1,067,000 1,075,000 0.6
60,000 Northern States Power Co. 2,613,600 2,820,000 1.7
66,000 Public Service Co. of Colorado 2,137,905 2,422,000 1.5
100,000 Wisconsin Energy Corp. 2,593,500 2,712,500 1.6
------------ ------------ ------
21,004,140 23,167,750 13.8
Utilities--Gas & 149,000 AGL Resources, Inc. 2,790,407 3,129,000 1.9
Gas Pipeline 125,000 The Brooklyn Union Gas Co. 3,351,250 3,625,000 2.2
40,000 Consolidated Natural Gas Co. 1,805,775 2,125,000 1.3
50,000 Sonat Inc. 882,073 2,462,500 1.5
------------ ------------ ------
8,829,505 11,341,500 6.9
Utilities-- 22,000 AT&T Corp. 870,320 767,250 0.5
Telecommunications 69,000 GTE Corp. 2,455,578 2,906,625 1.7
60,000 NYNEX Corp. 2,299,200 2,670,000 1.6
90,000 Southern New England
Telecommunications Corp. 3,095,355 3,352,500 2.0
38,000 Sprint Corp. 1,117,375 1,491,500 0.9
55,000 U S West Communications Group, Inc. 1,852,675 1,670,625 1.0
------------ ------------ ------
11,690,503 12,858,500 7.7
<PAGE>
Utilities--Water 76,000 American Water Works Co., Inc. 1,429,750 1,548,500 0.9
Total Investments in North America 117,245,378 152,015,900 90.5
Total Common Stocks 121,501,757 158,869,325 94.6
Face
Amount Short-Term Securities
Repurchase $2,050,000 UBS Securities Inc., purchased on
Agreements** 10/31/1996 to yield 5.50% to
11/01/1996 2,050,000 2,050,000 1.2
US Government & 7,000,000 Federal National Mortgage 6,984,804 6,984,804 4.2
Agency Association, 5.21% due 11/15/1996
Obligations***
Total Short-Term Securities 9,034,804 9,034,804 5.4
Total Investments $130,536,561 167,904,129 100.0
============
Other Assets Less Liabilities 28,590 0.0
------------ ------
Net Assets $167,932,719 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $18,825,612 and 1,531,056
shares of beneficial interest outstanding $ 12.30
============
Class B--Based on net assets of $96,903,847 and 7,877,221
shares of beneficial interest outstanding $ 12.30
============
Class C--Based on net assets of $2,278,226 and 186,404
shares of beneficial interest outstanding $ 12.22
============
Class D--Based on net assets of $49,925,034 and 4,061,088
shares of beneficial interest outstanding $ 12.29
============
<FN>
*American Depositary Receipts (ADR).
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
***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 Fund.
</TABLE>
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended October 31, 1996
Additions
AT&T Corp.
Essex Property Trust, Inc.
PaineWebber Group Inc.
Philip Morris Companies, Inc.
Tambrands Inc.
Deletions
Boatmen's Bancshares, Inc.
Cyprus Amax Minerals Co.
Lance, Inc.
McGraw-Hill, Inc.
Worthington Industries, Inc.
PORTFOLIO INFORMATION
As of October 31, 1996
Percent of
Ten Largest Common Stock Holdings Net Assets
The Clorox Co. 2.7%
Bristol-Myers Squibb Co. 2.5
General Electric Co. 2.2
Consolidated Edison Co. of New York, Inc. 2.2
The Brooklyn Union Gas Co. 2.2
CoreStates Financial Corp. 2.1
Ohio Casualty Corp. 2.1
Exxon Corp. 2.1
American General Corp. 2.1
American Electric Power Co., Inc. 2.1
