MERRILL LYNCH
STRATEGIC
DIVIDEND FUND
FUND LOGO
Quarterly Report
April 30, 1997
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
Security
Representation as a
Percentage of
Equities as of
April 30, 1997
A pie graph depicting security representation as a percentage of
equities as of April 30, 1997
Financial Services 18.4%
Energy 15.4%
Utilities 27.5%
Basic Industries 6.2%
Capital Goods 15.0%
Consumer 17.5%
<PAGE>
US Common Stock
Investments as of
April 30, 1997
S&P
Fund 500*
Average Capitalization (in billions) $27.6 $45.7
Price/Book Value 2.3 3.2
Price/Earnings Ratio** 15.2 20.3
Yield Based on Current Dividend 3.5% 1.9%
[FN]
*An unmanaged broad-based index comprised of common stocks.
**Based on trailing 12-month earnings.
DEAR SHAREHOLDER
Stock and bond market turbulence increased during the three-month
period ended April 30, 1997. Mounting evidence of stronger-than-
expected economic growth suggested to investors that the Federal
Reserve Board (FRB) would make a preemptive strike to contain
inflationary pressures. These concerns were heightened by statements
made by FRB Chairman Alan Greenspan, and culminated in an increase
in the Federal Funds rate of 0.25% to 5.50% on March 25. As
investors became concerned that this might prove to be only the
first in a series of monetary policy tightening moves, interest
rates rose and stock and bond prices declined. Following the central
bank's action, investor sentiment fluctuated from negative to more
positive, depending upon whether the latest economic data releases
were perceived to suggest an overheating or moderating trend. Stock
prices were given a boost following a series of strong corporate
earnings reports and the likelihood that a capital gains tax cut
would be part of the Federal balanced budget agreement. Nonetheless,
clear-cut signs of continued low inflation and moderate economic
growth, as well as no further indications of monetary policy
tightening, are probably needed to bring stability to the financial
markets.
On the international front, although the FRB's action triggered some
weakness in the US dollar, the US dollar subsequently continued its
strong advance relative to the yen and the Deutschemark, raising
concerns about the outlook for US trade. In early February, the
leading industrialized nations expressed apparent agreement that it
was time to seek a lower dollar and less volatility in the foreign
exchange markets. It remains to be seen whether these stated
intentions will be acted upon, or if the US dollar continues to rise
relative to other major currencies.
<PAGE>
Portfolio Matters
For the three months ended April 30, 1997, total returns for the
Fund's Class A, Class B, Class C and Class D Shares were +2.14%,
+1.86%, +1.86% and +2.07%, respectively. (Results shown do not
reflect sales charges; results 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.)
The Fund's Class A Shares modestly underperformed the +2.38% total
return of the unmanaged Standard & Poor's 500 Index (S&P 500).
The Fund's investment objective is to seek long-term total returns
by investing primarily in dividend-paying common stocks. In the
April quarter, the Fund's returns outperformed the +1.2% total
return for an unmanaged portfolio of the 200 highest-yielding stocks
in the S&P 500. Over 90% of the Fund's net assets were invested in
common stocks that had dividend yields above the 1.9% yield of the
S&P 500. At quarter-end, the gross dividend yield on the Fund's
stock holdings was 3.5%, nearly double that of the S&P 500, and
above the 3.3% average dividend yield for the 200 highest-yielding
stocks in the S&P 500.
During the April quarter, the best performance relative to the
overall market was among stocks whose yields ranged between 1.4%--
2.1%. These stocks represented about 15.6% of the Fund's net assets.
The worst performance relative to the market was in the top 100
yield stocks of the S&P 500. These stocks had yields ranging between
2.85%--9.11% and represented 66% of the Fund's net assets. As a
result, the Fund's heaviest investment exposure continued to be in
the three highest-yielding sectors of the S&P 500--utilities,
financials and energy--which together accounted for about 56% of net
assets and had an average yield of 4.4%. The Fund benefited from its
investments in financial stocks, which accounted for 17% of net
assets. The 25% of net assets invested in utility stocks--electrics,
natural gas and telecommunications--and our 14% exposure to energy
stocks, hurt performance. However, these latter three sectors
continued to be among some of the Fund's best-performing individual
investments, specifically, Exxon Corp., Great Western Financial
Corp., IPALCO Enterprises, Inc., Mellon Bank Corp. and Sprint Corp.
During the quarter ended April 30, 1997, we initiated a new
investment in one stock, eliminated three from the portfolio, and
reduced positions in three companies. Our single new purchase was
the shares of KN Energy, Inc., a fully integrated natural gas
company engaged in all aspects of that business: development,
processing, marketing, transportation and local distribution. The
bulk of the company's revenues and profits is derived from the
gathering, processing and marketing services businesses. KN Energy's
retail distribution operations are located in four Central states
where the company also operates an extensive intrastate pipeline
system. The company's earnings are expected to grow at a rate in the
mid-teens over the next several years as the benefits of a recent
acquisition begin to contribute. With the shares attractively valued
on a price/ earnings and price/cash flow basis and offering a
generous dividend yield, we believe the stock offers attractive
total return prospects.
<PAGE>
We eliminated our investments in Great Western Financial
Corporation, IPALCO Enterprises, Inc. and Sprint Corp., realizing
substantial capital gains after all three stocks appreciated
significantly in the April quarter and reached our price targets. We
also took partial capital gains in our holdings in Beneficial Corp.,
Lincoln National Corp. and J.P. Morgan & Co., Inc. As a result, our
cash reserves during the quarter ended April 30, 1997 increased to
nearly 9% of net assets, a level which we believe offers some
protection if the market declines, as well as an available source of
funding for new, attractively valued investments when those
opportunities are available.
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 annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Walter D. Rogers)
Walter D. Rogers
Vice President and
Portfolio Manager
<PAGE>
May 22, 1997
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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables 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.
<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
1996 12.22 12.68 1.232 0.527 +19.08
1/1/97--4/30/97 12.68 13.28 -- 0.086 + 5.44
------ ------
Total $4.922 Total $4.466
Cumulative total return as of 4/30/97: +168.83%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 12.24 12.69 1.232 0.391 +17.71
1/1/97--4/30/97 12.69 13.29 -- 0.051 + 5.15
------ ------
Total $5.048 Total $3.761
<PAGE>
Cumulative total return as of 4/30/97: +176.55%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 12.17 12.61 1.232 0.400 +17.82
1/1/97--4/30/97 12.61 13.20 -- 0.050 + 5.09
------ ------
Total $3.339 Total $0.916
Cumulative total return as of 4/30/97: +58.43%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 12.22 12.68 1.232 0.496 +18.79
1/1/97--4/30/97 12.68 13.28 -- 0.078 + 5.37
------ ------
Total $3.339 Total $1.128
Cumulative total return as of 4/30/97: +61.74%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
4/30/97 1/31/97 4/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Strategic Dividend Fund Class A Shares* $13.28 $13.09 $12.80 +14.35%(1) +1.45%
ML Strategic Dividend Fund Class B Shares* 13.29 13.10 12.80 +14.42(1) +1.45
ML Strategic Dividend Fund Class C Shares* 13.20 13.01 12.73 +14.34(1) +1.46
ML Strategic Dividend Fund Class D Shares* 13.28 13.09 12.79 +14.44(1) +1.45
Standard & Poor's 500 Index** 801.34 786.16 654.17 +22.50 +1.93
ML Strategic Dividend Fund Class A Shares--Total Return* +19.12(2) +2.14(3)
ML Strategic Dividend Fund Class B Shares--Total Return* +17.93(4) +1.86(5)
ML Strategic Dividend Fund Class C Shares--Total Return* +17.91(6) +1.86(7)
ML Strategic Dividend Fund Class D Shares--Total Return* +18.92(8) +2.07(9)
Standard & Poor's 500 Index--Total Return** +25.09 +2.38
<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 $1.232 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.532 per share ordinary
income dividends and $1.232 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.086 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.395 per share ordinary
income dividends and $1.232 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.051 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.399 per share ordinary
income dividends and $1.232 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.050 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.500 per share ordinary
income dividends and $1.232 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.078 per share ordinary
income dividends.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 +15.92% + 9.83%
Five Years Ended 3/31/97 +14.06 +12.83
Inception (11/29/88) through 3/31/97 +12.19 +11.47
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +14.78% +10.78%
Five Years Ended 3/31/97 +12.90 +12.90
Inception (11/25/87) through 3/31/97 +11.15 +11.15
[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 3/31/97 +14.78% +13.78%
Inception (10/21/94) through 3/31/97 +19.30 +19.30
[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 3/31/97 +15.73% + 9.66%
Inception (10/21/94) through 3/31/97 +20.30 +17.67
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<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 $ 3,028,200 1.7%
Total Investments in the
Netherlands 982,387 3,028,200 1.7
Spain Oil & Gas Producers 50,000 Repsol S.A. (ADR)* 1,597,265 2,093,750 1.1
Total Investments in Spain 1,597,265 2,093,750 1.1
United Oil--International 19,168 British Petroleum Co. PLC (ADR)* 1,696,341 2,637,996 1.5
Kingdom
Total Investments in the United
Kingdom 1,696,341 2,637,996 1.5
Total Investments in Europe 4,275,993 7,759,946 4.3
NORTH
AMERICA
United Aerospace & Defense 40,000 Northrop Grumman Corp. 1,435,901 3,340,000 1.9
States 28,000 Rockwell International Corp. 1,565,072 1,862,000 1.0
60,000 TRW Inc. 1,663,737 3,127,500 1.8
------------ ------------ ------
4,664,710 8,329,500 4.7
<PAGE>
Automobiles 85,000 Ford Motor Company 2,416,975 2,953,750 1.7
50,000 General Motors Corp. 2,421,750 2,893,750 1.6
------------ ------------ ------
4,838,725 5,847,500 3.3
Automotive Equipment 72,000 Arvin Industries, Inc. 1,656,934 1,872,000 1.0
60,000 Dana Corp. 1,649,850 1,912,500 1.1
------------ ------------ ------
3,306,784 3,784,500 2.1
Banks 20,000 Bankers Trust New York Corp. 1,418,062 1,627,500 0.9
40,000 Barnett Banks, Inc. 1,002,350 1,955,000 1.1
74,000 CoreStates Financial Corp. 2,584,814 3,746,250 2.1
46,000 First Commerce Corp. 1,587,910 1,863,000 1.0
23,000 Mellon Bank Corp. 990,205 1,911,875 1.1
23,000 Mercantile Bancorp. 1,002,055 1,334,000 0.7
10,000 Morgan (J.P.) & Co., Inc. 897,556 1,018,750 0.6
------------ ------------ ------
9,482,952 13,456,375 7.5
Chemicals 23,000 The Dow Chemical Co. 1,369,880 1,952,125 1.1
30,700 du Pont (E.I.) de Nemours & Co. 2,060,442 3,258,038 1.8
------------ ------------ ------
3,430,322 5,210,163 2.9
Cosmetics & 34,000 Avon Products, Inc. 1,009,895 2,095,250 1.2
Household 32,000 The Clorox Co. 1,908,257 4,076,000 2.3
Products ------------ ------------ ------
2,918,152 6,171,250 3.5
</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 Drugs 40,000 American Home Products Corp. $ 2,125,575 $ 2,650,000 1.5%
States 80,000 Bristol-Myers Squibb Co. 1,826,550 5,240,000 2.9
(concluded) 35,000 Lilly (Eli) & Co. 951,993 3,075,625 1.7
------------ ------------ ------
4,904,118 10,965,625 6.1
Electrical 38,600 General Electric Co. 1,864,814 4,279,775 2.4
Equipment
Engineering & 37,000 Foster Wheeler Corp. 1,380,470 1,429,125 0.8
Construction
<PAGE>
Financial Services 35,000 Beneficial Corp. 1,352,468 2,240,000 1.2
30,000 PaineWebber Group Inc. 713,100 1,020,000 0.6
------------ ------------ ------
2,065,568 3,260,000 1.8
Insurance 95,000 American General Corp. 1,961,793 4,144,375 2.3
30,000 Lincoln National Corp. 1,275,150 1,680,000 0.9
110,000 Ohio Casualty Corp. 3,512,187 4,262,500 2.4
------------ ------------ ------
6,749,130 10,086,875 5.6
Machinery 70,800 The Manitowoc Company, Inc. 1,306,732 2,867,400 1.6
Metals 55,000 Carpenter Technology Corp. 1,747,599 2,234,375 1.3
Miscellaneous 28,000 Minnesota Mining & Manufacturing Co. 1,608,098 2,436,000 1.4
Technology
Oil--Domestic 14,000 Atlantic Richfield Co. 1,584,596 1,905,750 1.1
15,000 KN Energy, Inc. 607,105 558,750 0.3
50,000 Occidental Petroleum Corp. 1,318,625 1,106,250 0.6
62,000 Phillips Petroleum Co. 2,146,570 2,441,250 1.4
50,000 Ultramar Corp. 1,578,500 1,606,250 0.9
------------ ------------ ------
7,235,396 7,618,250 4.3
Oil--International 80,000 Exxon Corp. 2,379,692 4,530,000 2.5
20,000 Mobil Corp. 915,150 2,600,000 1.5
30,000 Texaco Inc. 1,407,728 3,165,000 1.8
------------ ------------ ------
4,702,570 10,295,000 5.8
Paper & Forest 60,000 Weyerhaeuser Co. 2,666,100 2,745,000 1.5
Products
Photography 40,000 Eastman Kodak Co. 1,624,689 3,340,000 1.9
Real Estate 40,000 Avalon Properties, Inc. 840,138 1,055,000 0.6
Investment Trusts 35,000 Essex Property Trust, Inc. 867,275 1,023,750 0.6
60,000 Patriot American Hospitality Inc. 716,256 1,290,000 0.7
------------ ------------ ------
2,423,669 3,368,750 1.9
Retail 29,000 May Department Stores Co. 1,140,994 1,341,250 0.8
50,000 Penney (J.C.) Company Inc. 2,315,950 2,387,500 1.3
------------ ------------ ------
3,456,944 3,728,750 2.1
<PAGE>
Utilities--Electric 85,000 American Electric Power Co., Inc. 2,682,600 3,442,500 1.9
106,000 Boston Edison Company 2,656,360 2,703,000 1.5
126,000 Consolidated Edison Co. of New
York, Inc. 3,559,500 3,496,500 2.0
105,000 Edison International, Inc. 1,759,425 2,205,000 1.2
100,000 Houston Industries Inc. 1,934,250 2,000,000 1.1
50,000 Long Island Lighting Co. 1,120,500 1,143,750 0.6
60,000 Northern States Power Co. 2,613,600 2,730,000 1.5
66,000 Public Service Co. of Colorado 2,137,905 2,557,500 1.5
100,000 Wisconsin Energy Corp. 2,593,500 2,500,000 1.4
------------ ------------ ------
21,057,640 22,778,250 12.7
Utilities--Gas & 149,000 AGL Resources, Inc. 2,790,407 2,868,250 1.6
Gas Pipeline 40,000 Consolidated Natural Gas Co. 1,805,775 2,015,000 1.1
50,000 Sonat Inc. 882,073 2,856,250 1.6
------------ ------------ ------
5,478,255 7,739,500 4.3
Utilities-- 22,000 AT&T Corp. 829,342 737,000 0.4
Telecommunications 69,000 GTE Corp. 2,455,578 3,165,375 1.8
60,000 NYNEX Corp. 2,299,200 3,105,000 1.7
90,000 Southern New England
Telecommunications Corp. 3,095,355 3,285,000 1.8
55,000 U S West Communications Group, Inc. 1,852,675 1,931,875 1.1
------------ ------------ ------
10,532,150 12,224,250 6.8
Utilities--Water 76,000 American Water Works Co., Inc. 1,429,750 1,615,000 0.9
Total Investments in North America 110,875,337 155,811,213 87.2
Total Common Stocks 115,151,330 163,571,159 91.5
Face
Amount Short-Term Securities
Repurchase $7,502,000 HSBC Securities, Inc., purchased
Agreements** on 4/30/1997 to yield 5.37% to
5/01/1997 7,502,000 7,502,000 4.2
US Government 2,000,000 Federal Home Loan Bank, 5.45% due
Agency 5/06/1997 1,998,183 1,998,183 1.1
Obligations*** Federal National Mortgage
Association:
4,000,000 5.43% due 5/06/1997 3,996,380 3,996,380 2.3
2,000,000 5.39% due 5/12/1997 1,996,407 1,996,407 1.1
------------ ------------ ------
7,990,970 7,990,970 4.5
<PAGE>
Total Short-Term Securities 15,492,970 15,492,970 8.7
Total Investments $130,644,300 179,064,129 100.2
============
Liabilities in Excess of Other Assets (275,329) (0.2)
------------ ------
Net Assets $178,788,800 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $24,497,992 and
1,844,148 shares outstanding $ 13.28
============
Class B--Based on net assets of $95,439,043 and
7,178,841 shares outstanding $ 13.29
============
Class C--Based on net assets of $2,741,984 and
207,649 shares outstanding $ 13.20
============
Class D--Based on net assets of $56,109,781 and
4,224,563 shares outstanding $ 13.28
============
<FN>
*American Depositary Receipts (ADR).
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
***US Government Agency Obligations are traded on a discount basis;
the interest rate shown is the discount rate paid at the time of
purchase by the Fund.
</TABLE>
PORTFOLIO INFORMATION
As of April 30, 1997
Percent of
Ten Largest Common Stock Holdings Net Assets
Bristol-Myers Squibb Co. 2.9%
Exxon Corp. 2.5
General Electric Co. 2.4
Ohio Casualty Corp. 2.4
American General Corp. 2.3
The Clorox Co. 2.3
CoreStates Financial Corp. 2.1
Consolidated Edison Co. of New York, Inc. 2.0
American Electric Power Co., Inc. 1.9
Eastman Kodak Co. 1.9
<PAGE>
PORTFOLIO CHANGES
For the Quarter Ended April 30, 1997
Addition
KN Energy, Inc.
Deletions
Great Western Financial Corporation
IPALCO Enterprises, Inc.
Sprint Corp.
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
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
