MERRILL LYNCH
STRATEGIC
DIVIDEND FUND
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1998
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
Walter D. Rogers, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Thomas D. Jones, III, 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
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of
future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Statements and other information herein
are as dated and are subject to change.
Merrill Lynch
Strategic Dividend Fund
Box 9011
Princeton, NJ
08543-9011 #10561 -- 1/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH STRATEGIC DIVIDEND FUND
[GRAPHIC OMITTED: PIE CHART OF SECURITY REPRESENTATION AS A
PERCENTAGE OF EQUITIES AS OF JANUARY 31, 1998]
Security
Representation as a
Percentage of
Equities as of
January 31, 1998
Utilities 30.4%
Capital Goods 13.4%
Energy 10.5%
Financial Services 19.7%
Consumer 18.2%
Basic Industries 7.8%
US Common Stock
Investments as of
January 31, 1998
S&P
Fund 500*
Average Capitalization (in billions) $22.2 $54.4
Price/Book Value 3.3 3.9
Price/Earnings Ratio** 18.3 22.1
Yield Based on Current Dividend 3.3% 1.6%
* An unmanaged broad-based index comprised of common stocks.
** Based on trailing 12-month earnings.
Merrill Lynch Strategic Dividend Fund, January 31, 1998
DEAR SHAREHOLDER
Volatility continued to highlight stock and bond markets worldwide
during the quarter ended January 31, 1998. The initial focus of
investor concerns was the widening financial crisis in Asia. In the
wake of a series of currency devaluations, many emerging economies are
facing the challenges of higher interest rates, slowing economic
growth and declining corporate earnings. Although the announcement of
International Monetary Fund (IMF) loan packages to Thailand, Indonesia
and South Korea initially reassured investors, the stringent terms of
the loans and their potential negative impact on these already
beleaguered economies are now being called into question. In Japan,
the failure of several major financial institutions has undermined the
prospects for economic recovery.
As developments in Asia continue to unfold, US equity investors are
trying to gauge the impact of poorer Asian economic prospects on
multinational corporations. Although there have been periods of rising
share prices, investor confidence has not been definitively restored.
The US bond market benefited from a "flight to quality" as investors
anticipated slower economic growth, but the release of stronger-than-
expected economic statistics also prompted periods of declining bond
prices.
As 1998 progresses, investors are likely to continue to focus on the
prospects for the US economy within the context of international
developments. The uncertainties created by the ongoing developments in
Asia -- combined with the absence of inflationary pressures and the
prospect of a balanced Federal budget -- have kept monetary policy "on
hold" for the present. It remains to be seen whether the trends of
moderate economic growth and low inflation will continue, which would
make it unlikely that the Federal Reserve Board would tighten monetary
policy early in the new year.
Portfolio Matters
For the three months ended January 31, 1998, Merrill Lynch Strategic
Dividend Fund's Class A, Class B, Class C and Class D Shares had total
returns of +5.11%, +4.82%, +4.87% and +4.97%, 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 underperformed the +7.62% total return for the
unmanaged Standard & Poor's 500 Index (S&P 500) and modestly
underperformed the +5.44% return of the Lipper Equity Income Funds
Average. However, the Fund performed in line with the +5.10% total
return for the 200 highest-yielding stocks in the S&P 500.
The January quarter was marked by financial and economic turmoil in
Asian markets. As concerns about the stability of many of the Asian
economies mounted and growth prospects for those markets were scaled
back, stocks of US companies with real or perceived exposure to those
markets suffered the sharpest corrections in their share prices.
Holdings in the basic industrial, energy, capital goods and banking
sectors posted the sharpest declines in market values. The Fund's
exposure to these sectors accounted for 30% of net assets. The balance
of the Fund's holdings posted favorable relative results when compared
to the overall market. Our holdings in the telecommunications sector
posted particularly strong returns. Holdings in the consumer and
electric utility sectors also produced good relative results.
Combined, the sectors with positive relative performance accounted for
41% of the Fund's net assets.
Of the Fund's 74 equity holdings at January quarter-end, 95% had
dividend yields above the yield of the S&P 500. The Fund's 3.3% gross
dividend yield was more than double the 1.6% yield of the S&P 500. We
continued to focus our investment activities in the January quarter on
systematically increasing the overall yield of the Fund's holdings. We
believe the two highest-yielding strata of the market offer many
attractively valued investment opportunities.
Transactions in the January quarter included initiating positions in
eleven new investments and increasing our investment in one existing
holding. We eliminated the stocks of nine companies because we
believed they offered limited upside potential and reduced our
investments in ten others, largely realizing capital gains. We
initiated investments in four bank holding companies, three electric
utilities, two telecommunications companies and two food manufacturing
companies.
We eliminated the shares of three banking companies: Barnett Banks,
Inc., CoreStates Financial Corp. and First Commerce Corp. All three
companies announced agreements to merge with other larger
institutions, resulting in significant appreciation in their market
values. To maintain our weighting in this industry group we acquired
the shares of The Bank of New York Company, Inc., Crestar Financial
Corporation, National City Corporation and State Street Corporation.
We believe the shares of all four banking companies offer attractive
long-term total return potential. We took partial profits in our
investment in Bankers Trust New York Corp. and eliminated our small
investment in Uniao de Bancos Brasileiros S.A. (Unibanco), a Brazilian
bank holding company.
We added three electric utilities: Central and South West Corporation,
Entergy Corporation and PECO Energy Company. In addition to offering
very attractive dividend yields, all three companies have also
announced restructuring plans that should pave the way for stock price
appreciation over the longer term. We also added two
telecommunications stocks that we believed offered attractive total
returns, Ameritech Corporation and Frontier Corporation. We took
partial profits in our investment in Southern New England
Telecommunications Corp. after the company agreed to be acquired by
SBC Communications. Finally, we increased our weighting in the
consumer sector by initiating investments in the shares of General
Mills, Inc. and Quaker Oats Company, two food companies, and adding to
our holding in American Home Products Corp., a pharmaceutical company.
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 in our upcoming quarterly report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/WALTER D. ROGERS
Walter D. Rogers
Senior Vice President and Portfolio Manager
March 9, 1998
PORTFOLIO INFORMATION
As of January 31, 1998
Percent of
Ten Largest Common Stock Holdings Net Assets
Bristol-Myers Squibb Co. 2.7%
American General Corp. 2.7
Ohio Casualty Corp. 2.5
American Home Products Corp. 2.4
Ford Motor Company 2.2
Bell Atlantic Corp. 2.1
American Electric Power Co., Inc. 2.1
Boston Edison Company 2.0
Southern New England Telecommunications Corp. 2.0
PECO Energy Company 1.9
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] Class A Shares incur a maximum initial sales charge
(front-end load) of 5.25% and bear no ongoing distribution
or account maintenance fees. Class A Shares are available only to
eligible investors.
[bullet] Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing 1%
each year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to Class
D Shares after approximately 8 years. (There is no initial sales
charge for automatic share conversions.)
[bullet] Class C Shares are subject to a distribution fee of 0.75% and
an account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
[bullet] Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a repre-sentation
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.
<TABLE>
<CAPTION>
Performance
Summary --
Class A Shares
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
1997 12.68 14.67 1.203 0.396 +28.51
1/1/98 -- 1/31/98 14.67 14.62 -- -- - 0.34
Total $6.125 Total $4.776
Cumulative total return as of 1/31/98: +226.55%**
* 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>
<CAPTION>
Performance
Summary --
Class B Shares
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
1997 12.69 14.70 1.203 0.244 +27.32
1/1/98 -- 1/31/98 14.70 14.63 -- -- - 0.48
Total $6.251 Total $3.954
Cumulative total return as of 1/31/98: +233.26%**
* 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>
<CAPTION>
Performance
Summary --
Class C Shares
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
1997 12.61 14.58 1.203 0.249 +27.21
1/1/98 -- 1/31/98 14.58 14.52 -- -- - 0.41
Total $4.542 Total $1.115
Cumulative total return as of 1/31/98: +90.98%**
* 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>
<CAPTION>
Performance
Summary --
Class D Shares
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
1997 12.68 14.67 1.203 0.362 +28.21
1/1/98 -- 1/31/98 14.67 14.61 -- -- - 0.41
Total $4.542 Total $1.412
Cumulative total return as of 1/31/98: +95.99%**
* 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>
<CAPTION>
Recent
Performance
Results
12 Month 3 Month
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Strategic Dividend Fund Class A Shares* $14.62 $14.30 $13.09 +20.76%(1) +4.51%(2)
ML Strategic Dividend Fund Class B Shares* 14.63 14.31 13.10 +20.73(1) +4.50(2)
ML Strategic Dividend Fund Class C Shares* 14.52 14.20 13.01 +20.73(1) +4.54(2)
ML Strategic Dividend Fund Class D Shares* 14.61 14.30 13.09 +20.68(1) +4.43(2)
Standard & Poor's 500 Index** 980.28 914.62 786.16 +24.69 +7.18
ML Strategic Dividend Fund Class A Shares -- Total Return* +24.06(3) +5.11(4)
ML Strategic Dividend Fund Class B Shares -- Total Return* +22.75(5) +4.82(6)
ML Strategic Dividend Fund Class C Shares -- Total Return* +22.79(7) +4.87(8)
ML Strategic Dividend Fund Class D Shares -- Total Return* +23.69(9) +4.97(10)
Standard & Poor's 500 Index -- Total Return** +26.89 +7.62
* 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 $1.203 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.323 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.396 per share ordinary income dividends and $1.203 per share capital gains
distributions.
(4) Percent change includes reinvestment of $0.086 per share ordinary income dividends and $0.323 per share capital gains
distributions.
(5) Percent change includes reinvestment of $0.244 per share ordinary income dividends and $1.203 per share capital gains
distributions.
(6) Percent change includes reinvestment of $0.046 per share ordinary income dividends and $0.323 per share capital gains
distributions.
(7) Percent change includes reinvestment of $0.249 per share ordinary income dividends and $1.203 per share capital gains
distributions.
(8) Percent change includes reinvestment of $0.048 per share ordinary income dividends and $0.323 per share capital gains
distributions.
(9) Percent change includes reinvestment of $0.362 per share ordinary income dividends and $1.203 per share capital gains
distributions.
(10) Percent change includes reinvestment of $0.077 per share ordinary income dividends and $0.323 per share capital gains
distributions.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +28.51% +21.77%
Five Years Ended 12/31/97 +17.08 +15.83
Inception (11/29/88) through
12/31/97 +13.95 +13.28
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +27.32% +23.32%
Five Years Ended 12/31/97 +15.88 +15.88
Ten Years Ended 12/31/97 +12.77 +12.77
* 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 12/31/97 +27.21% +26.21%
Inception (10/21/94) through
12/31/97 +22.61 +22.61
* 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 12/31/97 +28.21% +21.48%
Inception (10/21/94) through
12/31/97 +23.61 +21.54
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in US dollars)
Shares Value Percent of
EUROPE Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C> <C>
Netherlands Oil -- International 60,000 Royal Dutch Petroleum PLC (NY
Registered Shares) $883,990 $3,075,000 1.5%
------------ ------------ ------
Total Investments in the
Netherlands 883,990 3,075,000 1.5
============ ============ ======
United Kingdom Oil -- International 30,000 British Petroleum Co. PLC
(ADR)* 1,328,520 2,409,375 1.2
------------ ------------ ------
Total Investments in the
United Kingdom 1,328,520 2,409,375 1.2
============ ============ ======
Total Investments in Europe 2,212,510 5,484,375 2.7
============ ============ ======
NORTH
AMERICA
United States Aerospace & Defense 28,000 Rockwell International Corp. 1,365,320 1,564,500 0.8
60,000 TRW Inc. 1,663,738 3,052,500 1.5
------------ ------------ ------
3,029,058 4,617,000 2.3
Automobiles 85,000 Ford Motor Company 2,416,975 4,335,000 2.2
50,000 General Motors Corp. 2,290,947 2,896,875 1.4
------------ ------------ ------
4,707,922 7,231,875 3.6
Automotive Equipment & 72,000 Arvin Industries, Inc. 1,656,934 2,484,000 1.2
Tires 50,000 Cooper Tire and Rubber Company 1,202,300 1,203,125 0.6
60,000 Dana Corp. 1,649,850 3,007,500 1.5
------------ ------------ ------
4,509,084 6,694,625 3.3
Banks 39,000 The Bank of New York Company,
Inc. 1,989,838 2,113,313 1.0
10,000 Bankers Trust New York Corp. 709,031 1,043,125 0.5
38,000 Crestar Financial Corporation 1,964,030 1,995,000 1.0
10,000 J.P. Morgan & Co., Inc. 897,556 1,011,875 0.5
46,000 Mellon Bank Corp. 990,205 2,777,250 1.4
34,500 Mercantile Bancorp. 1,002,055 1,742,250 0.9
30,000 National City Corporation 2,011,800 1,805,625 0.9
32,000 State Street Corporation 1,952,758 1,792,000 0.9
------------ ------------ ------
11,517,273 14,280,438 7.1
Business Services 52,000 Dun & Bradstreet Corp. 1,505,435 1,657,500 0.8
Capital Goods 38,000 Cooper Industries, Inc. 2,036,029 2,016,375 1.0
40,000 General Electric Co. 966,225 3,100,000 1.5
60,000 Harris Corporation 2,600,982 2,857,500 1.4
70,000 The Manitowoc Company, Inc. 861,311 2,380,000 1.2
28,000 Minnesota Mining &
Manufacturing Co. 1,608,098 2,338,000 1.2
68,000 Ogden Corporation 1,531,759 1,704,250 0.9
------------ ------------ ------
9,604,404 14,396,125 7.2
Chemicals 23,000 The Dow Chemical Co. 1,369,880 2,070,000 1.0
61,400 E.I. du Pont de Nemours & Co. 2,060,442 3,476,775 1.8
------------ ------------ ------
3,430,322 5,546,775 2.8
Drugs 50,000 American Home Products Corp. 3,031,175 4,771,875 2.4
55,000 Bristol-Myers Squibb Co. 1,255,753 5,482,813 2.7
------------ ------------ ------
4,286,928 10,254,688 5.1
Engineering &
Construction 37,000 Foster Wheeler Corp. 1,380,470 888,000 0.4
Financial Services 35,000 Beneficial Corp. 1,352,468 2,716,875 1.3
Foods 40,000 General Mills, Inc. 2,938,894 2,977,500 1.5
55,000 Quaker Oats Company 2,983,189 2,956,250 1.5
------------ ------------ ------
5,922,083 5,933,750 3.0
Household Products 24,000 The Clorox Co. 728,490 1,839,000 0.9
Insurance 95,000 American General Corp. 1,961,793 5,355,625 2.7
30,000 Lincoln National Corp. 1,275,150 2,270,625 1.1
110,000 Ohio Casualty Corp. 3,512,187 4,977,500 2.5
------------ ------------ ------
6,749,130 12,603,750 6.3
Merchandising 50,000 J.C. Penney Company, Inc. 2,315,950 3,368,750 1.7
29,000 May Department Stores Co. 1,140,994 1,524,313 0.7
------------ ------------ ------
3,456,944 4,893,063 2.4
Metals 55,000 Carpenter Technology Corp. 1,747,599 2,389,062 1.2
Oil -- Domestic 28,000 Atlantic Richfield Co. 1,584,596 2,082,500 1.0
90,000 Occidental Petroleum Corp. 2,323,525 2,295,000 1.2
50,000 Phillips Petroleum Co. 1,731,105 2,200,000 1.1
------------ ------------ ------
5,639,226 6,577,500 3.3
Oil -- International 40,000 Exxon Corp. 1,189,846 2,372,500 1.2
40,000 Mobil Corp. 915,150 2,725,000 1.4
50,000 Texaco Inc. 1,177,506 2,603,125 1.3
------------ ------------ ------
3,282,502 7,700,625 3.9
Paper & Forest Products 66,000 Union Camp Corp. 3,963,011 3,774,375 1.9
60,000 Weyerhaeuser Co. 2,666,100 2,988,750 1.5
------------ ------------ ------
6,629,111 6,763,125 3.4
Photography 20,000 Eastman Kodak Co. 812,344 1,305,000 0.6
Real Estate Investment 38,000 Apartment Investment &
Trusts Management Co. (Class A) 1,201,028 1,410,750 0.7
25,000 Avalon Properties, Inc. 519,181 735,937 0.4
63,000 Crescent Real Estate Equities
Company 1,991,111 2,212,875 1.1
35,000 Essex Property Trust, Inc. 854,486 1,205,312 0.6
30,000 Mack-Cali Realty Corporation (a) 1,126,800 1,209,375 0.6
30,000 Patriot American Hospitality,
Inc. 394,148 768,750 0.4
------------ ------------ ------
6,086,754 7,542,999 3.8
Utilities -- Electric 85,000 American Electric Power Co.,
Inc. 2,682,600 4,191,563 2.1
106,000 Boston Edison Company 2,656,360 3,948,500 2.0
60,000 Central and South West
Corporation 1,598,600 1,623,750 0.8
63,000 Consolidated Edison Co. of New
York, Inc. 1,779,750 2,602,687 1.3
105,000 Edison International, Inc. 1,759,425 2,821,875 1.4
60,000 Entergy Corporation 1,689,850 1,717,500 0.9
50,000 Long Island Lighting Co. 1,120,500 1,456,250 0.7
66,000 New Century Energies, Inc. 2,137,905 3,007,125 1.5
60,000 Northern States Power Co. 2,613,600 3,217,500 1.6
200,000 PECO Energy Company 3,948,520 3,787,500 1.9
------------ ------------ ------
21,987,110 28,374,250 14.2
Utilities -- Gas & 40,000 Consolidated Natural Gas Co. 1,805,775 2,172,500 1.1
Gas Pipeline 48,000 KN Energy, Inc. 1,996,896 2,412,000 1.2
50,000 Sonat Inc. 882,073 2,184,375 1.1
------------ ------------ ------
4,684,744 6,768,875 3.4
Utilities -- 78,000 Ameritech Corporation 3,008,168 3,349,125 1.7
Telecommunications 46,080 Bell Atlantic Corp. 2,299,200 4,265,280 2.1
120,000 Frontier Corporation 3,101,508 3,127,500 1.6
40,000 GTE Corp. 1,429,930 2,182,500 1.1
60,000 Southern New England
Telecommunications Corp. 2,086,245 3,907,500 2.0
55,000 U S West Communications Group,
Inc. 1,852,675 2,646,875 1.3
------------ ------------ ------
13,777,726 19,478,780 9.8
Utilities -- Water 76,000 American Water Works Co., Inc. 1,429,750 2,052,000 1.0
------------ ------------ ------
Total Investments in North
America 128,256,877 182,505,680 91.1
============ ============ ======
Total Common Stocks 130,469,387 187,990,055 93.8
============ ============ ======
<CAPTION>
Face
Amount Short-Term Securities
<S> <C> <C> <C> <C> <C> <C>
Repurchase $9,870,000 UBS Securities Inc., purchased
Agreements** on 1/30/1998 to yield 5.59% to
2/02/1998 9,870,000 9,870,000 4.9
US Government 5,000,000 Federal Farm Credit Bank,
Agency Obligations*** 5.37% due 2/09/1998 4,992,541 4,992,541 2.5
2,000,000 Federal Home Loan Mortgage
Corp., 5.57% due 2/02/1998 1,999,072 1,999,072 1.0
------------ ------------ ------
6,991,613 6,991,613 3.5
------------ ------------ ------
Total Short-Term Securities 16,861,613 16,861,613 8.4
============ ============ ======
Total Investments $147,331,000 204,851,668 102.2
============
Liabilities in Excess of Other Assets (4,501,314) (2.2)
------------ ------
Net Assets $200,350,354 100.0%
============ ======
* 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 rates shown are the
discount rates paid at the time of purchase by the Fund.
(a) Formerly Cali Realty Corp.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
As of January 31, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $147,331,000) (Note 1a) $204,851,668
Cash 1,828
Receivables:
Dividends $527,296
Beneficial interest sold 327,972 855,268
------------
Prepaid registration fees and other assets (Note 1g) 49,925
------------
Total assets 205,758,689
------------
Liabilities: Payables:
Securities purchased 3,948,520
Beneficial interest redeemed 1,073,510
Investment adviser (Note 2) 98,023
Distributor (Note 2) 84,258 5,204,311
------------
Accrued expenses and other liabilities 204,024
------------
Total liabilities 5,408,335
------------
Net Assets: Net assets $200,350,354
============
Net Assets Class A Shares of beneficial interest, $.10 par value, unlimited number
Consist of: of shares authorized $207,071
Class B Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 520,519
Class C Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 24,609
Class D Shares of beneficial interest, $.10 par value, unlimited number
of shares authorized 618,096
Paid-in capital in excess of par 128,266,908
Undistributed investment income -- net 357,582
Undistributed realized capital gains on investments and foreign currency
transactions -- net 12,834,901
Unrealized appreciation on investments -- net 57,520,668
------------
Net assets $200,350,354
============
Net Asset Class A -- Based on net assets of $30,273,274 and 2,070,708 shares of
Value: beneficial interest outstanding $14.62
============
Class B -- Based on net assets of $76,171,271 and 5,205,189 shares of
beneficial interest outstanding $14.63
============
Class C -- Based on net assets of $3,572,611 and 246,087 shares of
beneficial interest outstanding $14.52
============
Class D -- Based on net assets of $90,333,198 and 6,180,959 shares of
beneficial interest outstanding $14.61
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended January 31, 1998
<S> <C> <C> <C>
Investment Dividends (net of $14,329 foreign withholding tax) $3,008,954
Income Interest and discount earned 427,123
(Notes 1e & 1f): ------------
Total income 3,436,077
------------
Expenses: Investment advisory fees (Note 2) $598,272
Account maintenance and distribution fees -- Class B (Note 2) 421,955
Account maintenance fees -- Class D (Note 2) 102,769
Transfer agent fees -- Class B (Note 2) 69,785
Transfer agent fees -- Class D (Note 2) 58,124
Printing and shareholder reports 47,221
Registration fees (Note 1g) 36,381
Professional fees 33,825
Accounting services (Note 2) 24,583
Transfer agent fees -- Class A (Note 2) 20,933
Account maintenance and distribution fees -- Class C (Note 2) 16,127
Trustees' fees and expenses 12,654
Custodian fees 12,349
Transfer agent fees -- Class C (Note 2) 2,796
Pricing fees 206
Other 4,917
------------
Total expenses 1,462,897
------------
Investment income -- net 1,973,180
------------
Realized & Realized gain from:
Unrealized Gain Investments -- net 17,202,816
(Loss) on Foreign currency transactions -- net 354 17,203,170
Investments & ------------
Foreign Currency Change in unrealized appreciation on investments -- net (9,152,829)
Transactions -- Net ------------
(Notes 1c, 1d, 1f & 3): Net Increase in Net Assets Resulting from Operations $10,023,521
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <C> <C> <C>
Operations: Investment income -- net $1,973,180 $3,936,804
Realized gain on investments and foreign currency transactions
-- net 17,203,170 13,476,208
Change in unrealized appreciation/depreciation on investments
-- net (9,152,829) 41,809,369
-------------- --------------
Net increase in net assets resulting from operations 10,023,521 59,222,381
-------------- --------------
Dividends & Investment income -- net:
Distributions to Class A (380,318) (633,917)
Shareholders Class B (624,804) (1,785,749)
(Note 1h): Class C (25,197) (46,527)
Class D (964,801) (1,455,366)
Realized gain on investments -- net:
Class A (2,370,162) (1,974,335)
Class B (6,786,151) (10,210,077)
Class C (257,657) (237,095)
Class D (6,550,432) (5,178,309)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (17,959,522) (21,521,375)
-------------- --------------
Beneficial Interest Net increase in net assets derived from beneficial interest
Transactions transactions 8,235,382 1,139,438
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 299,381 38,840,444
Beginning of period 200,050,973 161,210,529
-------------- --------------
End of period* $200,350,354 $200,050,973
============== ==============
* Undistributed investment income -- net $357,582 $379,522
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Class A
The following per share data
and ratios have been derived For the Six
from information provided in Months Ended
the financial statements. January 31, For the Year Ended July 31,
1998+ 1997+ 1996+ 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.21 $12.43 $12.24 $12.78 $13.60
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income -- net .19 .38 .38 .39 .41
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net .63 4.17 1.55 1.10 (.12)
---------- ---------- ---------- ---------- ----------
Total from investment operations .82 4.55 1.93 1.49 .29
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.19) (.39) (.36) (.42) (.46)
Realized gain on investments -- net (1.22) (1.38) (1.38) (1.61) (.65)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.41) (1.77) (1.74) (2.03) (1.11)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $14.62 $15.21 $12.43 $12.24 $12.78
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.36%++++ 40.42% 16.98% 14.04% 2.38%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .91%* .90% 1.04% 1.05% .85%
Net Assets: ========== ========== ========== ========== ==========
Investment income -- net 2.53%* 2.87% 3.04% 3.39% 3.42%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $30,273 $28,940 $18,106 $18,687 $21,854
Data: ========== ========== ========== ========== ==========
Portfolio turnover 22.81% 14.29% 26.42% 52.69% 22.75%
========== ========== ========== ========== ==========
Average commission rate paid++ $.0613 $.0619 $.0576 -- --
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales loads.
++++ Aggregate total investment return.
+ Based on average shares outstanding.
++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average
commission rate per share for purchases and sales of equity securities. The "Average Commission Rate
Paid" includes commissions paid in foreign currencies, which have been converted into US dollars using
the prevailing exchange rate on the date of the transaction. Such conversions may significantly affect
the rate shown.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Class B
The following per share data
and ratios have been derived For the Six
from information provided in Months Ended
the financial statements. January 31, For the Year Ended July 31,
1998++ 1997++ 1996++ 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.22 $12.44 $12.23 $12.77 $13.59
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income -- net .11 .25 .26 .29 .33
Realized and unrealized gain (loss) on
investments and foreign currency
transactions -- net .63 4.16 1.55 1.07 (.18)
---------- ---------- ---------- ---------- ----------
Total from investment operations .74 4.41 1.81 1.36 .15
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.11) (.25) (.22) (.29) (.32)
Realized gain on investments -- net (1.22) (1.38) (1.38) (1.61) (.65)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.33) (1.63) (1.60) (1.90) (.97)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $14.63 $15.22 $12.44 $12.23 $12.77
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 4.79%++++ 38.90% 15.89% 12.82% 1.30%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.94%* 1.94% 2.08% 2.09% 1.88%
Net Assets: ========== ========== ========== ========== ==========
Investment income -- net 1.53%* .89% 2.06% 2.36% 2.39%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $76,171 $93,509 $96,461 $130,921 $167,889
Data: ========== ========== ========== ========== ==========
Portfolio turnover 22.81% 14.29% 26.42% 52.69% 22.75%
========== ========== ========== ========== ==========
Average commission rate paid+++ $.0613 $.0619 $.0576 -- --
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Class C
For the
The following per share data For the Period
and ratios have been derived Six Months For the Year Oct. 21,
from information provided in Ended Ended 1994+ to
the financial statements. January 31, July 31, July 31,
1998++ 1997++ 1996++ 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.11 $12.37 $12.20 $11.84
Operating ---------- ---------- ---------- ----------
Performance: Investment income -- net .11 .24 .24 .21
Realized and unrealized gain on
investments and foreign currency
transactions -- net .64 4.13 1.55 1.21
---------- ---------- ---------- ----------
Total from investment operations .75 4.37 1.79 1.42
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.12) (.25) (.24) (.25)
Realized gain on investments -- net (1.22) (1.38) (1.38) (.81)
---------- ---------- ---------- ----------
Total dividends and distributions (1.34) (1.63) (1.62) (1.06)
---------- ---------- ---------- ----------
Net asset value, end of period $14.52 $15.11 $12.37 $12.20
========== ========== ========== ==========
Total Investment Based on net asset value per share 4.87%++++ 38.84% 15.78% 13.30%++++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.95%* 1.95% 2.08% 2.19%*
Net Assets: ========== ========== ========== ==========
Investment income -- net 1.48%* 1.83% 1.91% 1.94%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $3,573 $3,025 $1,953 $811
Data: ========== ========== ========== ==========
Portfolio turnover 22.81% 14.29% 26.42% 52.69%
========== ========== ========== ==========
Average commission rate paid+++ $.0613 $.0619 $.0576 --
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Class D
For the
The following per share data For the Period
and ratios have been derived Six Months For the Year Oct. 21,
from information provided in Ended Ended 1994+ to
the financial statements. January 31, July 31, July 31,
1998++ 1997++ 1996++ 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.20 $12.43 $12.24 $11.85
Operating ---------- ---------- ---------- ----------
Performance: Investment income -- net .17 .35 .34 .26
Realized and unrealized gain on
investments and foreign currency
transactions -- net .64 4.16 1.57 1.23
---------- ---------- ---------- ----------
Total from investment operations .81 4.51 1.91 1.49
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.18) (.36) (.34) (.29)
Realized gain on investments -- net (1.22) (1.38) (1.38) (.81)
---------- ---------- ---------- ----------
Total dividends and distributions (1.40) (1.74) (1.72) (1.10)
---------- ---------- ---------- ----------
Net asset value, end of period $14.61 $15.20 $12.43 $12.24
========== ========== ========== ==========
Total Investment Based on net asset value per share 5.23%++++ 39.99% 16.73% 13.98%++++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.16%* 1.15% 1.28% 1.38%*
Net Assets: ========== ========== ========== ==========
Investment income -- net 2.26%* 2.62% 2.62% 2.93%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $90,333 $74,577 $44,691 $13,988
Data: ========== ========== ========== ==========
Portfolio turnover 22.81% 14.29% 26.42% 52.69%
========== ========== ========== ==========
Average commission rate paid+++ $.0613 $.0619 $.0576 --
========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales loads.
++++ Aggregate total investment return.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average
commission rate per share for purchases and sales of equity securities. The "Average Commission Rate
Paid" includes commissions paid in foreign currencies, which have been converted into US dollars using
the prevailing exchange rate on the date of the transaction. Such conversions may significantly affect
the rate shown.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Strategic Dividend Fund, January 31, 1998
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
Pricingsm System. Shares of Class A and Class D are sold with a front-
end sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares 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 (except that Class B shareholders may vote
upon any material changes to Class D account maintenance and
distribution expenditures). The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments -- Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at the
last available bid price. Securities traded in the over-the-counter
market are valued at the last available bid price prior to the time of
valuation. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated by or
under the authority of the Board of 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.
(b) Repurchase agreements -- The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank of the
Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer agrees
to repurchase the security at a mutually agreed upon time and price.
The Fund takes possession of the underlying securities, marks to
market such securities and, if necessary, receives additions to such
securities daily to ensure that the contract is fully collateralized.
(c) Derivative financial instruments -- The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
[bullet] Financial futures contracts -- The Fund may purchase or sell
interest rate futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to the
contract, the Fund agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and
are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
[bullet] 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.
[bullet] Forward foreign exchange contracts -- The Fund is authorized
to enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
[bullet] Options -- The Fund is authorized to write call and put
options 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.
(d) 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.
(e) 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.
(f) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-dividend
dates. Dividends from foreign securities where the ex-dividend date
may have passed are subsequently recorded when the Fund has determined
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.
(g) Prepaid registration fees -- Prepaid registration fees are charged
to expense as the related shares are issued.
(h) 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.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also
provides account maintenance and distribution services to the Fund.
The ongoing account maintenance fee compensates the Distributor and
MLPF&S for providing account maintenance services to Class B, Class C
and Class D shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B and Class C shareholders.
For the six months ended January 31, 1998, 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 $171 $2,258
Class D $1,030 $13,503
For the six months ended January 31, 1998, MLPF&S received contingent
deferred sales charges of $34,180 and $69 relating to transactions in
Class B and Class C Shares, respectively.
In addition, MLPF&S received $6,140 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended
January 31, 1998.
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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1998 were $42,209,203 and
$46,184,416, respectively.
Net realized and unrealized gains (losses) as of January 31, 1998 were
as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $17,202,860 $57,520,668
Short-term investments (44) --
Foreign currency transactions 354 --
------------- -------------
Total $17,203,170 $57,520,668
============= =============
As of January 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $57,520,668, of which $58,804,845 related to
appreciated securities and $1,284,177 related to depreciated
securities. At January 31, 1998, the aggregate cost of investments for
Federal income tax purposes was $147,331,000.
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest
transactions was $8,235,382 and $1,139,438 for the six months ended
January 31, 1998 and for the year ended July 31, 1997, respectively.
Transactions in shares of beneficial interest for each class were
as follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 266,681 $3,970,525
Shares issued to shareholders in
reinvestment of dividends
and distributions 154,148 2,315,430
------------- -------------
Total issued 420,829 6,285,955
Shares redeemed (253,329) (3,788,562)
------------- -------------
Net increase 167,500 $2,497,393
============= =============
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 738,877 $9,839,082
Shares issued to shareholders in
reinvestment of dividends
and distributions 174,588 2,156,968
------------- -------------
Total issued 913,465 11,996,050
Shares redeemed (466,533) (6,214,661)
------------- -------------
Net increase 446,932 $5,781,389
============= =============
Class B Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 551,208 $8,155,860
Shares issued to shareholders in
reinvestment of dividends
and distributions 386,172 5,819,962
------------- -------------
Total issued 937,380 13,975,822
Automatic conversion of shares (1,178,156) (17,469,665)
Shares redeemed (699,268) (10,402,781)
------------- -------------
Net decrease (940,044) $(13,896,624)
============= =============
Class B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 1,152,569 $15,222,749
Shares issued to shareholders in
reinvestment of dividends
and distributions 780,725 9,588,807
------------- -------------
Total issued 1,933,294 24,811,556
Automatic conversion of shares (1,502,518) (20,727,653)
Shares redeemed (2,041,893) (27,000,714)
------------- -------------
Net decrease (1,611,117) $(22,916,811)
============= =============
Class C Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 94,626 $1,417,301
Shares issued to shareholders in
reinvestment of dividends
and distributions 15,281 228,211
------------- -------------
Total issued 109,907 1,645,512
Shares redeemed (63,953) (968,113)
------------- -------------
Net increase 45,954 $677,399
============= =============
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 168,820 $2,194,913
Shares issued to shareholders in
reinvestment of dividends
and distributions 16,466 201,175
------------- -------------
Total issued 185,286 2,396,088
Shares redeemed (143,105) (1,879,385)
------------- -------------
Net increase 42,181 $516,703
============= =============
Class D Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 102,586 $1,514,203
Automatic conversion of shares 1,179,098 17,469,665
Shares issued to shareholders in
reinvestment of dividends
and distributions 411,138 6,172,725
------------- -------------
Total issued 1,692,822 25,156,593
Shares redeemed (417,571) (6,199,379)
------------- -------------
Net increase 1,275,251 $18,957,214
============= =============
Class D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 148,779 $1,971,059
Automatic conversion of shares 1,502,850 20,727,653
Shares issued to shareholders in
reinvestment of dividends
and distributions 436,926 5,386,950
------------- -------------
Total issued 2,088,555 28,085,662
Shares redeemed (778,090) (10,327,505)
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Net increase 1,310,465 $17,758,157
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PORTFOLIO CHANGES
For the Quarter Ended January 31, 1998
Additions
Ameritech Corporation
The Bank of New York Company, Inc.
Central and South West Corporation
Crestar Financial Corporation
Entergy Corporation
Frontier Corporation
General Mills, Inc.
National City Corporation
PECO Energy Company
Quaker Oats Company
* Raytheon Company (Class A)
State Street Corporation
Deletions
Avon Products, Inc.
Barnett Banks, Inc.
CoreStates Financial Corp.
First Commerce Corp.
Northrop Grumman Corp.
* Raytheon Company (Class A)
Repsol S.A. (ADR)
Ultramar Corp.
Uniao de Bancos Brasileiros S.A.
(Unibanco)(GDR)
Union Pacific Corp.
* Added and deleted in the same quarter.
