MERRILL LYNCH
STRATEGIC
DIVIDEND FUND
FUND LOGO
Semi-Annual Report
January 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
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
Although the partial shutdown of the US Government curtailed the
release of most economic data for the January quarter, it was
nonetheless apparent that gross domestic product (GDP) growth
continued to be lackluster. Consumer spending is barely growing, the
industrial sector is at a virtual standstill and, despite lower
mortgage rates, there is little or no pick-up in housing activity.
With inflationary pressures subdued, the Federal Reserve Board
responded to the slowing economy by modestly lowering short-term
interest rates in both December and January. Historically, it has
taken some time for shifts in monetary policy to have an impact on
economic growth. Therefore, the Federal Reserve Board's gradual
shift to lowering interest rates, which began early last year, may
not be reflected in a pick-up in real economic growth until later
this year.
The impasse between the Clinton Administration and Congress over the
Federal budget continues, although both sides have made concessions
since the debate began. It appears that investors are currently
focusing on the progress that has been made rather than on the
differences that remain. Initially, President Clinton proposed
deficits of about $190 billion annually through fiscal year 2002,
but now proposes balanced budgets, as do the Republicans. Current
indications are that a piecemeal budget accord is the most likely
outcome. Even without the proposed policy changes, it appears that
the US Federal budget deficit would remain stable at about 2% of GDP
for the rest of the decade. This would be far better than is the
case for most Group of Seven industrial nations, and for the United
States would represent a great improvement over the last 15 years.
Although this may fall short of investors' best expectations, it
appears that the Federal budget debate over the past year has
resulted in a trend toward a more conservative fiscal policy.
<PAGE>
Portfolio Matters
For the three month period ended January 31, 1996, total returns for
Merrill Lynch Strategic Dividend Fund's Class A, Class B, Class C
and Class D Shares were +12.13%, +11.88%, +11.84% and +12.10%,
respectively, exceeding the unmanaged Standard & Poor's 500
Composite Index's total return of +10.01% and the higher-yielding
S&P's stocks estimated total return of +9.60%. (Results shown do not
reflect sales charges and would be lower if sales charges were
included. For complete performance information, including average
annual total returns, see pages 4--6 of this report to
shareholders.)
Our strategy continued to focus primarily on investments which yield
above the S&P 500. At January quarter-end, two-thirds of the Fund's
equity investments had yields that were 100 basis points--600 basis
points (1.00%--6.00%) above the yield of the S&P 500. The dividend
yield of the S&P 500 as of January 31, 1996 (based on 1995
dividends) was 2.2% while the gross weighted (by dollars invested)
yield of the Fund's equity investments was 3.4%.
Stocks with yields at or above the S&P 500 generally performed in
line with the overall stock market, which climbed to record levels
during the January quarter. This was achieved despite the relative
underperformance of electric utility and telecommunications stocks,
which returned -2.3% and -3.7%, respectively. Positive relative
price performance was achieved by the energy and financial sectors
which rose 0.97% and 3.80%, respectively. Natural gas and oil stocks
modestly outpaced the performance of the overall market during the
quarter ended January 31, 1996 as the colder weather across the
country had a significant positive impact on oil and natural gas
prices. Financial stocks benefited from declining interest rates and
continued strong earnings reports.
During the January quarter we eliminated two positions, established
six new positions, and reduced fifteen holdings. Since Federal Paper
Board Co., Inc. agreed to be acquired by International Paper Co., we
chose to eliminate our holding and realized capital gains in the
former company. We also sold our entire position in NICOR, Inc.
because we expect that a large capital spending program will hurt
future earnings growth. Our new investments included Ford Motor
Company, J.C. Penney Company, Inc., Edison International (formerly
SCEcorp), Pacific Gas and Electric Company, United Technologies
Corporation, and Weyerhaeuser Company.
Our investment in Ford Motor Company, the world's second-largest
motor vehicle manufacturer, represented an addition to our
automotive and auto parts holdings. Ford has one of the strongest
balance sheets in the industry, generating strong excess cash flow
which we believe will be returned to shareholders in the form of
dividend increases and share repurchases. Tightly controlled raw
material and personnel costs, combined with an improved product mix
and the anticipated improvement in domestic and international
automotive sales, should produce solid earnings in upcoming
quarters. We believe the shares are attractively valued at current
prices, based on historical dividend yield, and on price/book value
and price/cash flow ratios.
<PAGE>
With the purchase of J.C. Penney Company, Inc. shares, we increased
our exposure to the attractively valued department store retail
segment. J.C. Penney's strong balance sheet protects its generous
dividend and should allow for further share repurchases. In the
current highly competitive retailing environment, we believe that
merchandisers must be focused, have strong managements and solid
financials. The company's strategy focuses on well-priced,
fashionable apparel and home lines sold under its exclusive private
label brands. We expect J.C. Penney's sales to improve as the year
progresses. At current price levels, the stock appears attractive
based on its historical relative price/earnings and price/book value
ratios.
Two California electric utilities were added to the Fund: Edison
International and Pacific Gas and Electric Company. Uncertainty
surrounding the outcome of the California Public Utilities
Commission's order on industry restructuring depressed the share
prices of both stocks to levels which, in our view, discounted any
potential negative decision and its impact on their balance sheets
and future earnings power.
United Technologies Corporation is a large, diversified industrial
aerospace company which generates an increasing percentage of sales
from global markets (approximately 55%) and commercial aerospace
markets (approximately 61%). The company has the potential to exceed
its five-year historical 12% annual earnings growth rate, yet its
shares trade at stock market multiples, based on price/earnings and
price/book value ratios. Strong cash flow and low debt puts the
company in a good position to take advantage of the consolidating
defense/aerospace businesses.
Our investment in Weyerhaeuser Company, one of the two-largest wood
products companies and the fourth-largest US paper company,
represents an addition to the Fund's holdings in the basic cyclical
sector. We believe this sector offers attractive valuations at
current levels. Weyerhaeuser owns extensive timberland acreage in
the United States, and exports account for about 15% of sales. Its
attractive dividend yield, solid balance sheet and the potential for
earnings growth as demand for wood products rises, combined with a
share repurchase plan, make Weyerhaeuser an attractive holding.
<PAGE>
The outlook for the US economy, as it is continuously discounted in
the stock market, is between optimism, as reflected in cyclical
stock prices, and pessimism, as reflected in defensive, interest-
sensitive stock prices. Recently, cyclicals became overly depressed.
However, the recent rally may counter that minority who recently
have begun discussing a possible recession. In the midst of this
argument, our investment strategy includes using a diversified
mixture of quality stocks with generally above market-yields that
have the potential for additional upside with limited downside risk.
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 quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Walter D. Rogers)
Walter D. Rogers
Vice President and Portfolio Manager
March 13, 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.
<PAGE>
* 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.
* 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.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
1/31/96 10/31/95 1/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Strategic Dividend Fund Class A Shares* $12.56 $11.57 $11.07 +26.33%(1) +10.69%(2)
ML Strategic Dividend Fund Class B Shares* 12.56 11.56 11.06 +26.44(1) +10.78(2)
ML Strategic Dividend Fund Class C Shares* 12.50 11.52 11.04 +26.12(1) +10.65(2)
ML Strategic Dividend Fund Class D Shares* 12.56 11.57 11.07 +26.32(1) +10.69(2)
Standard & Poor's 500 Index** 636.02 581.50 470.42 +35.20 + 9.38
ML Strategic Dividend Fund Class A Shares--Total Return* +31.22(3) +12.13(4)
ML Strategic Dividend Fund Class B Shares--Total Return* +29.91(5) +11.88(6)
ML Strategic Dividend Fund Class C Shares--Total Return* +29.88(7) +11.84(8)
ML Strategic Dividend Fund Class D Shares--Total Return* +30.95(9) +12.10(10)
Standard & Poor's 500 Index--Total Return** +38.63 +10.01
<PAGE>
<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 $1.309 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.238 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.463 per share ordinary
income dividends and $1.309 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.160 per share ordinary
income dividends and $0.238 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.330 per share ordinary
income dividends and $1.309 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.122 per share ordinary
income dividends and $0.238 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.358 per share ordinary
income dividends and $1.309 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.132 per share ordinary
income dividends and $0.238 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.439 per share ordinary
income dividends and $1.309 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.157 per share
ordinary income dividends and $0.238 per share capital gains
distributions.
</TABLE>
<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--1/31/96 12.22 12.56 -- -- + 2.78
------ ------
Total $3.690 Total $3.853
Cumulative total return as of 1/31/96:+120.07%**
<PAGE>
<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--1/31/96 12.24 12.56 -- -- + 2.61
------ ------
Total $3.816 Total $3.319
Cumulative total return as of 1/31/96:+129.27%**
<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>
PERFORMANCE DATA (concluded)
<PAGE>
<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--1/31/96 12.17 12.50 -- -- + 2.71
------ ------
Total $2.107 Total $0.466
Cumulative total return as of 1/31/96:+31.42%**
<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--1/31/96 12.22 12.56 -- -- + 2.78
------ ------
Total $2.107 Total $0.554
Cumulative total return as of 1/31/96:+32.81%**
<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
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +32.08% +25.14%
Five Years Ended 12/31/95 +12.68 +11.47
Inception (11/29/88) through 12/31/95 +11.34 +10.49
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +30.73% +26.73%
Five Years Ended 12/31/95 +11.55 +11.55
Inception (11/25/87) through 12/31/95 +10.43 +10.43
[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 12/31/95 +30.59% +29.59%
Inception (10/21/94) through 12/31/95 +22.92 +22.92
[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 12/31/95 +31.69% +24.77%
Inception (10/21/94) through 12/31/95 +23.93 +18.46
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
EUROPE Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Netherlands Oil--International 20,000 Royal Dutch Petroleum PLC (ADR)* $ 1,157,315 $ 2,780,000 1.6%
Total Investments in the Netherlands 1,157,315 2,780,000 1.6
Spain Oil & Gas Producers 52,000 Repsol S.A. (ADR)* 1,661,156 1,813,500 1.0
Total Investments in Spain 1,661,156 1,813,500 1.0
United Oil--International 19,000 British Petroleum Co. PLC (ADR)* 1,676,727 1,854,875 1.1
Kingdom
Total Investments in the
United Kingdom 1,676,727 1,854,875 1.1
Total Investments in Europe 4,495,198 6,448,375 3.7
NORTH
AMERICA
United Aerospace & Defense 52,000 Northrop Grumman Corp. 1,861,886 3,328,000 1.9
States 30,000 TRW Inc. 1,663,738 2,535,000 1.5
22,000 United Technologies Corporation 1,917,069 2,257,750 1.3
------------ ------------ ------
5,442,693 8,120,750 4.7
Automobiles 85,000 Ford Motor Company 2,416,975 2,518,125 1.5
50,000 General Motors Corp. 2,421,750 2,631,250 1.5
------------ ------------ ------
4,838,725 5,149,375 3.0
<PAGE>
Automotive Equipment 72,000 Arvin Industries, Inc. 1,656,934 1,413,000 0.8
60,000 Dana Corp. 1,649,850 1,972,500 1.1
------------ ------------ ------
3,306,784 3,385,500 1.9
Banks 20,000 Barnett Banks, Inc. 1,002,350 1,170,000 0.7
28,000 Boatmen's Bancshares, Inc. 1,004,500 1,197,000 0.7
55,000 The Chase Manhattan Corp. 1,934,896 3,795,000 2.2
74,000 CoreStates Financial Corp. 2,584,814 2,960,000 1.7
26,000 First Commerce Corp. 832,910 845,000 0.5
23,000 Mellon Bank Corp. 990,205 1,219,000 0.7
23,000 Mercantile Bancorp. 1,002,055 1,003,375 0.6
------------ ------------ ------
9,351,730 12,189,375 7.1
Chemicals 23,000 The Dow Chemical Co. 1,369,880 1,713,500 1.0
55,000 du Pont (E.I.) de Nemours & Co. 3,702,875 4,228,125 2.5
------------ ------------ ------
5,072,755 5,941,625 3.5
Cosmetics & Household 17,000 Avon Products, Inc. 1,009,895 1,343,000 0.8
Products 42,000 The Clorox Co. 2,495,108 3,470,250 2.0
------------ ------------ ------
3,505,003 4,813,250 2.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
NORTH AMERICA Shares Value Percent of
(concluded) Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Drugs 40,000 Bristol-Myers Squibb Co. $ 1,826,550 $ 3,540,000 2.1%
States 60,000 Eli Lilly & Co. 1,631,988 3,450,000 2.0
(concluded) ------------ ------------ ------
3,458,538 6,990,000 4.1
Electrical 65,000 General Electric Co. 3,140,231 4,988,750 2.9
Equipment
Financial 60,000 American Express Co. 1,281,835 2,760,000 1.6
Services 60,000 Beneficial Corp. 2,305,713 2,932,500 1.7
------------ ------------ ------
3,587,548 5,692,500 3.3
Food Merchandising 20,000 Lance, Inc. 360,000 337,500 0.2
Hardware Products 51,000 The Stanley Works 2,138,235 2,626,500 1.5
Information 20,000 Xerox Corp. 2,054,831 2,472,500 1.4
Processing
<PAGE>
Insurance 95,000 American General Corp. 1,961,793 3,586,250 2.1
50,000 Lincoln National Corp. 2,135,530 2,643,750 1.5
110,000 Ohio Casualty Corp. 3,512,187 4,070,000 2.4
------------ ------------ ------
7,609,510 10,300,000 6.0
Metals 55,000 Carpenter Technology Corp. 1,747,599 2,090,000 1.2
75,000 Cyprus Amax Minerals Co. 1,972,357 1,987,500 1.2
------------ ------------ ------
3,719,956 4,077,500 2.4
Miscellaneous 28,000 Minnesota Mining & Manufacturing
Technology Company 1,671,180 1,806,000 1.0
Oil--Domestic 30,000 Atlantic Richfield Co. 3,395,562 3,408,750 2.0
80,000 Phillips Petroleum Co. 2,769,768 2,610,000 1.5
------------ ------------ ------
6,165,330 6,018,750 3.5
Oil--International 40,000 Exxon Corp. 2,379,692 3,210,000 1.9
20,000 Mobil Corp. 915,150 2,215,000 1.3
30,000 Texaco Inc. 1,407,728 2,426,250 1.4
------------ ------------ ------
4,702,570 7,851,250 4.6
Paper & Forest 60,000 Weyerhaeuser Company 2,666,100 2,767,500 1.6
Products
Photography 45,000 Eastman Kodak Co. 1,827,775 3,301,875 1.9
Publishing/Printing 35,000 McGraw-Hill, Inc. 2,434,950 3,115,000 1.8
Real Estate 40,000 Avalon Properties, Inc. 846,650 890,000 0.5
Investment Trust 28,000 Developers Diversified Realty Corp. 791,000 805,000 0.5
30,000 Patriot American Hospitality Inc. 720,000 825,000 0.5
35,000 Simon Property Group, Inc. 886,200 783,125 0.5
------------ ------------ ------
3,243,850 3,303,125 2.0
Retail 50,000 J.C. Penney Company Inc. 2,315,950 2,450,000 1.4
29,000 May Department Stores Co. 1,257,489 1,290,500 0.7
36,000 Sears, Roebuck & Co. 1,208,160 1,494,000 0.9
------------ ------------ ------
4,781,599 5,234,500 3.0
Savings & Loan 80,000 Great Western Financial Corporation 1,685,600 1,920,000 1.1
Transportation 35,000 Union Pacific Corp. 1,752,100 2,331,875 1.4
<PAGE>
Utilities--Electric 85,000 American Electric Power Co., Inc. 2,682,600 3,761,250 2.2
126,000 Consolidated Edison Co. of
New York, Inc. 3,559,500 4,252,500 2.5
45,000 Edison International 705,825 832,500 0.5
100,000 Houston Industries Inc. 1,934,250 2,400,000 1.4
60,000 Northern States Power Co. 2,613,600 3,082,500 1.8
25,000 Pacific Gas and Electric Company 689,250 693,750 0.4
66,000 Public Service Co. of Colorado 2,137,905 2,376,000 1.4
64,000 Public Service Enterprise Group, Inc. 2,245,120 2,000,000 1.2
100,000 Wisconsin Energy Corp. 2,593,500 3,150,000 1.8
------------ ------------ ------
19,161,550 22,548,500 13.2
Utilities--Gas & 135,000 The Brooklyn Union Gas Co. 3,619,350 3,780,000 2.2
Gas Pipeline 70,000 Sonat, Inc. 1,237,693 2,415,000 1.4
------------ ------------ ------
4,857,043 6,195,000 3.6
Utilities-- 69,000 GTE Corp. 2,455,578 3,174,000 1.8
Telecommunications 60,000 NYNEX Corp. 2,299,200 3,217,500 1.9
100,000 Southern New England Telecommuni-
cations Corp. 3,431,713 4,000,000 2.3
58,000 Sprint Corporation 2,091,570 2,501,250 1.5
------------ ------------ ------
10,278,061 12,892,750 7.5
Total Investments in North America 122,814,247 156,371,250 91.0
Total Common Stocks 127,309,445 162,819,625 94.7
Face
Amount Short-Term Securities
Repurchase $6,896,000 UBS Securities Inc., purchased on
Agreements** 1/31/1996 to yield 5.90% to 2/01/1996 6,896,000 6,896,000 4.0
US Government 2,000,000 Federal National Mortgage Association,
& Agency 5.16% due 3/22/1996 1,985,380 1,985,380 1.2
Obligations***
Total Short-Term Securities 8,881,380 8,881,380 5.2
<PAGE>
Total Investments $136,190,825 171,701,005 99.9
============
Other Assets Less Liabilities 120,557 0.1
------------ ------
Net Assets $171,821,562 100.0%
============ ======
<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.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of January 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$136,190,825) (Note 1a) $171,701,005
Cash 11,321
Receivables:
Dividends $ 405,578
Beneficial interest sold 178,159 583,737
------------
Prepaid expenses and other assets (Note 1f) 69,527
------------
Total assets 172,365,590
------------
Liabilities: Payables:
Beneficial interest redeemed 170,033
Distributor (Note 2) 108,099
Investment adviser (Note 2) 90,589 368,721
------------
Accrued expenses and other liabilities 175,307
------------
Total liabilities 544,028
------------
Net Assets: Net assets $171,821,562
============
<PAGE>
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 150,450
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 875,657
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 12,191
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 329,594
Paid-in capital in excess of par 128,050,900
Undistributed investment income--net 155,928
Undistributed realized capital gains on investments and
foreign currency transactions--net 6,736,662
Unrealized appreciation on investments--net 35,510,180
------------
Net assets . $171,821,562
============
Net Asset Class A--Based on net assets of $18,896,437 and 1,504,495
Value: shares of beneficial interest outstanding $ 12.56
============
Class B--Based on net assets of $110,009,842 and 8,756,570
shares of beneficial interest outstanding $ 12.56
============
Class C--Based on net assets of $1,523,607 and 121,908 shares
of beneficial interest outstanding $ 12.50
============
Class D--Based on net assets of $41,391,676 and 3,295,941
shares of beneficial interest outstanding $ 12.56
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended January 31, 1996
<S> <S> <C> <C>
Investment Dividends (net of $28,229 foreign withholding tax) $ 3,334,300
Income Interest and discount earned 175,806
(Notes 1d & 1e): ------------
Total income 3,510,106
------------
<PAGE>
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 623,989
Investment advisory fees (Note 2) 498,281
Transfer agent fees--Class B (Note 2) 135,140
Printing and shareholder reports 76,161
Accounting services (Note 2) 54,275
Professional fees 44,787
Registration fees (Note 1f) 41,944
Account maintenance fees--Class D (Note 2) 27,077
Transfer agent fees--Class D (Note 2) 20,042
Transfer agent fees--Class A (Note 2) 16,799
Custodian fees 10,362
Trustees' fees and expenses 9,652
Account maintenance and distribution fees--Class C (Note 2) 5,735
Transfer agent fees--Class C (Note 2) 1,338
Pricing fees 382
Other 4,218
------------
Total expenses 1,570,182
------------
Investment income--net 1,939,924
------------
Realized & Realized gain from:
Unrealized Gain Investments--net 10,899,509
(Loss) on Foreign currency transactions--net 34 10,899,543
Investments & ------------
Foreign Currency Change in unrealized appreciation on:
Transactions--Net Investments--net 11,991,872
(Notes 1b, 1c, Foreign currency transactions--net (44) 11,991,828
1e & 3): ------------ ------------
Net realized and unrealized gain on investments and
foreign currency transactions 22,891,371
------------
Net Increase in Net Assets Resulting from Operations $ 24,831,295
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHAMGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 1,939,924 $ 4,252,093
Realized gain on investments and foreign currency transactions--net 10,899,543 25,348,235
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 11,991,828 (9,619,672)
------------ ------------
Net increase in net assets resulting from operations 24,831,295 19,980,656
------------ ------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (276,378) (668,538)
Shareholders Class B (1,129,066) (3,464,874)
(Note 1g): Class C (12,903) (8,975)
Class D (373,713) (247,242)
Realized gain on investments--net:
Class A (2,003,328) (2,560,061)
Class B (13,717,932) (19,570,649)
Class C (122,417) (13,005)
Class D (2,210,481) (470,632)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (19,846,218) (27,003,976)
------------ ------------
Beneficial Net increase (decrease) in net assets derived from beneficial
Interest interest transactions 2,429,465 (18,312,516)
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets 7,414,542 (25,335,836)
Beginning of period 164,407,020 189,742,856
------------ ------------
End of period* $171,821,562 $164,407,020
============ ============
<FN>
*Undistributed investment income--net $ 155,928 $ 8,064
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios Class A
have been derived from information provided For the Six
in the financial statements. Months Ended
January 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.24 $ 12.78 $ 13.60 $ 12.79 $ 11.90
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .19 .39 .41 .44 .44
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.70 1.10 (.12) .81 .93
-------- -------- -------- -------- --------
Total from investment operations 1.89 1.49 .29 1.25 1.37
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.19) (.42) (.46) (.44) (.48)
Realized gain on investments--net (1.38) (1.61) (.65) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.57) (2.03) (1.11) (.44) (.48)
-------- -------- -------- -------- --------
Net asset value, end of period $ 12.56 $ 12.24 $ 12.78 $ 13.60 $ 12.79
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.63%+++ 14.04% 2.38% 10.03% 11.96%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.07%* 1.05% .85% .81% .88%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 3.16%* 3.39% 3.42% 3.38% 3.75%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 18,896 $ 18,687 $ 21,854 $ 34,228 $ 31,512
Data: ======== ======== ======== ======== ========
Portfolio turnover 12.41% 52.69% 22.75% 25.23% 29.17%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
The following per share data and ratios Class B
have been derived from information provided For the Six
in the financial statements. Months Ended
January 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.23 $ 12.77 $ 13.59 $ 12.78 $ 11.88
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .13 .29 .33 .31 .34
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.70 1.07 (.18) .81 .91
-------- -------- -------- -------- --------
Total from investment operations 1.83 1.36 .15 1.12 1.25
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.12) (.29) (.32) (.31) (.35)
Realized gain on investments--net (1.38) (1.61) (.65) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.50) (1.90) (.97) (.31) (.35)
-------- -------- -------- -------- --------
Net asset value, end of period $ 12.56 $ 12.23 $ 12.77 $ 13.59 $ 12.78
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.05%+++ 12.82% 1.30% 8.90% 10.85%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.10%* 2.09% 1.88% 1.84% 1.91%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 2.18%* 2.36% 2.39% 2.37% 2.74%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $110,010 $130,921 $167,889 $227,089 $239,048
Data: ======== ======== ======== ======== ========
Portfolio turnover 12.41% 52.69% 22.75% 25.23% 29.17%
======== ======== ======== ======== ========
<CAPTION>
Class C Class D
For the For the For the For the
Six Period Six Period
The following per share data and ratios have been derived Months Oct. 21, Months Oct. 21,
from information provided in the financial statements Ended 1994++ to Ended 1994++ to
. Jan. 31, July 31, Jan. 31, July 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995 1996++++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.20 $ 11.84 $ 12.24 $ 11.85
Operating -------- -------- -------- --------
Performance: Investment income--net .12 .21 .15 .26
Realized and unrealized gain on investments and
foreign currency transactions--net 1.69 1.21 1.73 1.23
-------- -------- -------- --------
Total from investment operations 1.81 1.42 1.88 1.49
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.13) (.25) (.18) (.29)
Realized gain on investments--net (1.38) (.81) (1.38) (.81)
-------- -------- -------- --------
Total dividends and distributions (1.51) (1.06) (1.56) (1.10)
-------- -------- -------- --------
Net asset value, end of period $ 12.50 $ 12.20 $ 12.56 $ 12.24
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 16.00%+++ 13.30%+++ 16.52%+++ 13.98%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.12%* 2.19%* 1.33%* 1.38%*
Net Assets: ======== ======== ======== ========
Investment income--net 1.95%* 1.94%* 2.52%* 2.93%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,524 $ 811 $ 41,392 $ 13,988
Data: ======== ======== ======== ========
Portfolio turnover 12.41% 52.69% 12.41% 52.69%
======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effect of sales loads.
+++Aggregate total investment return.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Strategic Dividend Fund (the "Fund") is registered
under the Investment Company Act of 1940 as a 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 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 Fund.
<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 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 Trustees 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 quotations are not available are valued at fair
value as determined in good faith by or under the direction of the
Fund's Board of Trustees.
NOTES TO FINANCIAL STATEMENTS (continued)
(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.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contacts 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.
<PAGE>
* Foreign currency options and futures--The Fund 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 Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* 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.
* Options--The Fund is authorized to write and purchase put and call
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.
(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.
<PAGE>
(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 date, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of 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) 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.
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
Distributor, Inc. ("MLFD" or "Distributor"), 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 of 0.60%, on an annual basis,
of the average daily value of the Fund's net assets. The Investment
Advisory Agreement obligates MLAM to reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the average daily net assets in excess thereof. No fee
payment will be made to MLAM during any fiscal year which will cause
such expenses to exceed the pro rata expense limitation at the time
of such payment.
<PAGE>
Pursuant to the distribution plans (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 January 31, 1996, MLFD earned
underwriting discounts 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 $197 $2,938
Class D $611 $6,941
For the six months ended January 31, 1996, MLPF&S received
contingent deferred sales charges of $39,329 and $475 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $13,020 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended January 31, 1996.
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 trustees of the Fund are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1996 were $19,780,804 and
$38,519,767, respectively.
Net realized and unrealized gains as of January 31, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $10,899,486 $35,510,180
Short-term investments 23 --
Foreign currency transactions 34 --
----------- -----------
Total $10,899,543 $35,510,180
=========== ===========
As of January 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $35,510,180, of which $36,284,577
related to appreciated securities and $774,397 related to
depreciated securities. At January 31,1996, the aggregate cost of
investments for Federal income tax purposes was $136,190,825.
4. Shares of Beneficial Interest:
Net increase (decrease) in net assets derived from beneficial
interest transactions was $2,429,465 and $(18,312,516) for the six
months ended January 31, 1996 and for the year ended July 31, 1995,
respectively.
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 55,458 $ 677,263
Shares issued to shareholders in
reinvestment of dividends and
distributions 161,801 1,902,464
----------- ------------
Total issued 217,259 2,579,727
Shares redeemed (239,639) (2,932,310)
----------- ------------
Net decrease (22,380) $ (352,583)
=========== ============
<PAGE>
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 181,563 $ 2,155,978
Shares issued to shareholders in
reinvestment of dividends and
distributions 222,923 2,499,626
----------- ------------
Total issued 404,486 4,655,604
Shares redeemed (587,662) (7,012,619)
----------- ------------
Net decrease (183,176) $ (2,357,015)
=========== ============
Class B Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 458,248 $ 5,592,189
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,021,039 11,996,889
----------- ------------
Total issued 1,479,287 17,589,078
Shares redeemed (1,267,040) (15,418,807)
Automatic conversion of shares (2,156,702) (26,716,760)
----------- ------------
Net decrease (1,944,455) $(24,546,489)
=========== ============
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 1,056,552 $ 12,463,967
Shares issued to shareholders in
reinvestment of dividends and
distributions 1,658,976 18,600,026
----------- ------------
Total issued 2,715,528 31,063,993
Shares redeemed (3,932,552) (46,733,450)
Automatic conversion of shares (1,228,326) (14,212,015)
----------- ------------
Net decrease (2,445,350) $(29,881,472)
=========== ============
<PAGE>
Class C Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 64,592 $ 787,921
Shares issued to shareholders in
reinvestment of dividends and
distributions 8,325 97,650
----------- ------------
Total issued 72,917 885,571
Shares redeemed (17,500) (212,448)
----------- ------------
Net increase 55,417 $ 673,123
=========== ============
Class C Shares for the Period Dollar
October 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 76,521 $ 887,173
Shares issued to shareholders in
reinvestment of dividends and
distributions 963 10,674
----------- ------------
Total issued 77,484 897,847
Shares redeemed (10,993) (128,548)
----------- ------------
Net increase 66,491 $ 769,299
=========== ============
[FN]
++Commencement of Operations.
Class D Shares for the Six Months Dollar
Ended January 31, 1996 Shares Amount
Shares sold 294,634 $ 3,635,024
Automatic conversion of shares 2,153,981 26,716,760
Shares issued to shareholders in
reinvestment of dividends and
distributions 180,345 2,138,177
----------- ------------
Total issued 2,628,960 32,489,961
Shares redeemed (475,656) (5,834,547)
----------- ------------
Net increase 2,153,304 $ 26,655,414
=========== ============
<PAGE>
Class D Shares for the Period Dollar
October 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 118,404 $ 1,359,401
Automatic conversion of shares 1,226,771 14,212,015
Shares issued to shareholders in
reinvestment of dividends and
distributions 54,447 595,598
----------- ------------
Total issued 1,399,622 16,167,014
Shares redeemed (256,985) (3,010,342)
----------- ------------
Net increase 1,142,637 $ 13,156,672
=========== ============
[FN]
++Commencement of Operations.
PORTFOLIO CHANGES
For the Quarter Ended January 31, 1996
Additions
Edison International
Ford Motor Company
J.C. Penney Company, Inc.
Pacific Gas and Electric Company
United Technologies Corporation
Weyerhauser Company
Deletions
Federal Paper Board, Inc.
NICOR, Inc.
<PAGE>
PORTFOLIO INFORMATION
As of January 31, 1996
Percent of
Ten Largest Common Stock Holdings Net Assets
General Electric Co. 2.9%
Consolidated Edison Co. of New York, Inc. 2.5
du Pont (E.I.) de Nemours & Co. 2.5
Ohio Casualty Corp. 2.4
Southern New England Telecommunications Corp. 2.3
The Chase Manhattan Corp. 2.2
The Brooklyn Union Gas Co. 2.2
American Electric Power Co., Inc. 2.2
American General Corp. 2.1
Bristol-Myers Squibb Co. 2.1
