MERRILL LYNCH
STRATEGIC
DIVIDEND FUND
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
January 31, 2000
<PAGE>
MERRILL LYNCH STRATEGIC DIVIDEND FUND
Sector Representation as a Percentage of Equities as of January 31, 2000
[A pie graph depicting sector representations
as a percentage of equities as of January 31, 2000]
Utilities -- 30.0%
Capital Goods -- 6.3%
Energy -- 14.6%
Financial Services -- 29.3%
Basic Industries -- 7.4%
Consumer -- 12.4%
US Common Stock Investments as of January 31, 2000
S&P
Fund 500**
- ---------------------------------------------------------------
Average Capitalization (in billions) $32.7 $130.1
- ---------------------------------------------------------------
Price/Book Value 3.7 4.9
- ---------------------------------------------------------------
Price/Earnings Ratio*** 19.2 28.7
- ---------------------------------------------------------------
Yield Based on Current Dividend 2.5%* 1.2%
- ---------------------------------------------------------------
* Net yield after expenses for 12-months ended 1/31/2000, according to Lipper
Analytical Services.
** An unmanaged broad-based index comprised of common stocks.
*** Based on trailing 12-month earnings.
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
DEAR SHAREHOLDER
For the three months ended January 31, 2000, Merrill Lynch Strategic Dividend
Fund's Class A, Class B, Class C and Class D Shares had total returns of -5.60%,
- -5.85%, -5.83% and -5.59%, respectively. The Fund's performance lagged the
- -2.61% total return of the Lipper Analytical Services Inc.'s peer group of
Equity Income Funds for the same period. (Results shown do not reflect sales
charges and would be lower if sales charges were included. Complete performance
information can be found on pages 3 and 4 of this report to shareholders.)
Once again growth stocks outperformed value stocks by a wide margin, with
technology stocks leading the upward surge. Interest rates also climbed during
the January quarter, negatively impacting Fund performance. Because our focus is
primarily on stocks with above average dividend yields, we have a heavy
weighting in interest rate-sensitive stocks. For example, at January 31, 2000,
financial companies made up 26.0% of the Fund's net assets and utilities made up
26.3%. While the unmanaged Standard & Poor's 500 (S&P 500) Index posted a total
return of +2.61% for the three months ended January 31, 2000, the 200
highest-yielding stocks in the S&P 500 Index produced a total return of -10.70%.
Financial services stocks posted the sharpest relative price underperformance in
the January quarter, followed by utilities. The only relative outperformance in
the quarter was among stocks in the capital goods--technology and the services
sectors, where little or no yield was found.
With nearly 15% of the Fund's net assets invested in energy stocks, this group
represented our third above-average dividend yield sector exposure. Energy
stocks rallied late in the January quarter in response to sharply rising
commodity prices. Crude oil prices climbed to $30 per barrel, levels not seen
since the 1990 Gulf War. The history of oil prices is a volatile one. While it
is hard to predict the direction oil prices may take because of political and
economic factors, we do expect oil prices to remain at or near current levels
for most of this year. Industry inventory levels continue to decline, while
production is running at replacement levels. Typically, energy stocks move in
line with the price of the commodity. However, in this case the equity has not
followed the direction of the commodity. In fact, investor representation in the
energy sector has continued to drop to a 20-year low, as its weighting in the
S&P 500 Index was at just above 5% at January 31, 2000. We believe this
divergence represents an attractive investment opportunity, as the gulf between
the commodity and equity price closes.
Portfolio transactions during the January quarter included initiating three new
positions, eliminating three holdings and reducing two positions. However, the
net effect to sector or industry weightings essentially remained unchanged. As
value-style investing remains out of favor, it is incumbent on us to
continuously review our holdings for their investment attractiveness.
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 next
report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Trustee
/s/ Walter D. Rogers
Walter D. Rogers
Senior Vice President and
Portfolio Manager
March 7, 2000
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:
o 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.
o 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.)
o 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.
o 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 "Recent Performance Results" and
"Average Annual Total Return" 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.
2 & 3
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
PERFORMANCE DATA (concluded)
Recent Performance Results
<TABLE>
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception
As of January 31, 2000 Total Return Total Return Total Return
=========================================================================================================================
<S> <C> <C> <C>
ML Strategic Dividend Fund Class A Shares* -5.60% + 2.19% +211.63%
- -------------------------------------------------------------------------------------------------------------------------
ML Strategic Dividend Fund Class B Shares* -5.85 + 1.11 +181.15
- -------------------------------------------------------------------------------------------------------------------------
ML Strategic Dividend Fund Class C Shares* -5.83 + 1.16 +114.49
- -------------------------------------------------------------------------------------------------------------------------
ML Strategic Dividend Fund Class D Shares* -5.59 + 2.02 +123.78
- -------------------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +2.61 +10.35 +442.42/+231.52
=========================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be lower
if a sales charge was included. Total investment returns are based on changes
in net asset values for the periods shown, and assume reinvestment of all
dividends and capital gains distributions at net asset value on the
ex-dividend date. The Fund's ten-year/since inception periods are ten years
for Class A & Class B Shares and from 10/21/94 for Class C & Class D Shares.
** An unmanaged broad-based index comprised of common stocks. Ten years/since
inception total return periods are ten years and from 10/21/94, respectively.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/99 + 2.86% - 2.54%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +18.96 +17.68
- --------------------------------------------------------------------------------
Ten Years Ended 12/31/99 +11.82 +11.22
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%. (Prior to October 21, 1994, Class A Shares
were offered at a higher sales charge. Thus, actual returns would have been
lower than shown for the ten-year period.)
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/99 + 1.86% - 1.98%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +17.75 +17.75
- --------------------------------------------------------------------------------
Ten Years Ended 12/31/99 +10.69 +10.69
- --------------------------------------------------------------------------------
* 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 12/31/99 + 1.84% + 0.88%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 +17.72 +17.72
- --------------------------------------------------------------------------------
Inception (10/21/94) through 12/31/99 +16.54 +16.54
- --------------------------------------------------------------------------------
* 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 12/31/99 + 2.61% - 2.78%
- ---------------------------------------------------------------------------
Five Years Ended 12/31/99 +18.66 +17.39
- ---------------------------------------------------------------------------
Inception (10/21/94) through 12/31/99 +17.47 +16.26
- ---------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
PORTFOLIO INFORMATION
As of January 31, 2000
- -----------------------------------------------------------------------
Percent of
Ten Largest Common Stock Holdings Net Assets
The Chase Manhattan Corporation.................. 3.7%
Exxon Mobil Corporation.......................... 3.5
Royal Dutch Petroleum Company
(NY Registered Shares)......................... 3.5
Enron Corp....................................... 3.0
The Bank of New York Company, Inc................ 3.0
International Paper Company...................... 2.3
Columbia Energy Group............................ 2.3
SBC Communications Inc........................... 2.3
General Electric Company......................... 2.1
American General Corporation..................... 2.0
4 & 5
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Shares Percent of
EUROPE Industries Held Common Stocks Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Netherlands Oil--International 125,000 Royal Dutch Petroleum Company
(NY Registered Shares) $ 6,882,812 3.5%
------------------------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 6,882,812 3.5
====================================================================================================================================
United Kingdom Banking 200,000 National Westminster Bank PLC 3,851,021 1.9
------------------------------------------------------------------------------------------------------------------
Oil--International 61,008 BP Amoco PLC (ADR) (a) 3,279,180 1.7
------------------------------------------------------------------------------------------------------------------
Total Investments in the United Kingdom 7,130,201 3.6
====================================================================================================================================
Total Investments in Europe 14,013,013 7.1
====================================================================================================================================
NORTH
AMERICA
====================================================================================================================================
United States Aerospace & Defense 20,000 Rockwell International Corporation 988,750 0.5
------------------------------------------------------------------------------------------------------------------
Automobile 70,000 Ford Motor Company 3,482,500 1.8
------------------------------------------------------------------------------------------------------------------
Automotive 31,000 Arvin Industries, Inc. 718,812 0.3
Equipment & Tires 14,300 Dana Corporation 336,050 0.2
----------- -----
1,054,862 0.5
------------------------------------------------------------------------------------------------------------------
Automotive Parts 60,000 TRW Inc. 2,628,750 1.3
------------------------------------------------------------------------------------------------------------------
Banking 145,000 The Bank of New York Company, Inc. 5,890,625 3.0
90,000 The Chase Manhattan Corporation 7,239,375 3.7
72,139 Firstar Corporation 1,722,319 0.9
92,000 Mellon Financial Corporation 3,156,750 1.6
60,000 National City Corporation 1,297,500 0.7
78,000 PNC Bank Corp. 3,744,000 1.9
40,000 State Street Corporation 3,207,500 1.6
26,880 SunTrust Banks, Inc. 1,601,040 0.8
----------- -----
27,859,109 14.2
------------------------------------------------------------------------------------------------------------------
Business Services 52,000 The Dun & Bradstreet Corporation 1,309,750 0.7
------------------------------------------------------------------------------------------------------------------
Capital Goods 30,000 General Electric Company 4,001,250 2.1
28,000 Minnesota Mining and Manufacturing Company (3M) 2,621,500 1.3
----------- -----
6,622,750 3.4
------------------------------------------------------------------------------------------------------------------
Chemicals 23,000 The Dow Chemical Company 2,679,500 1.4
23,343 E.I. du Pont de Nemours and Company 1,377,237 0.7
----------- -----
4,056,737 2.1
------------------------------------------------------------------------------------------------------------------
Consumer--Durables 63,000 Whirlpool Corporation 3,669,750 1.9
------------------------------------------------------------------------------------------------------------------
Drugs 50,000 American Home Products Corporation 2,353,125 1.2
52,000 Bristol-Myers Squibb Company 3,432,000 1.7
----------- -----
5,785,125 2.9
------------------------------------------------------------------------------------------------------------------
Electrical & Electronics 100,000 NiSource Inc. 1,837,500 0.9
------------------------------------------------------------------------------------------------------------------
Foods 80,000 General Mills, Inc. 2,495,000 1.3
55,000 The Quaker Oats Company 3,265,625 1.6
----------- -----
5,760,625 2.9
------------------------------------------------------------------------------------------------------------------
Household Products 48,000 The Clorox Company 2,292,000 1.2
------------------------------------------------------------------------------------------------------------------
Insurance 65,000 American General Corporation 3,993,437 2.0
58,000 The Chubb Corporation 3,262,500 1.7
60,000 Lincoln National Corporation 2,216,250 1.1
170,000 Ohio Casualty Corporation 2,146,250 1.1
100,000 The St. Paul Companies, Inc. 3,018,750 1.6
----------- -----
14,637,187 7.5
------------------------------------------------------------------------------------------------------------------
Oil--Domestic 28,000 Atlantic Richfield Company (ARCO) 2,156,000 1.1
49,138 Conoco Inc. (Class B) 1,157,814 0.6
90,000 Occidental Petroleum Corporation 1,788,750 0.9
50,000 Phillips Petroleum Company 2,043,750 1.0
----------- -----
7,146,314 3.6
------------------------------------------------------------------------------------------------------------------
Oil--International 82,806 Exxon Mobil Corporation 6,914,301 3.5
50,000 Texaco Inc. 2,643,750 1.4
----------- -----
9,558,051 4.9
------------------------------------------------------------------------------------------------------------------
Paper & Forest Products 98,023 International Paper Company 4,668,345 2.3
60,000 Weyerhaeuser Company 3,442,500 1.8
----------- -----
8,110,845 4.1
------------------------------------------------------------------------------------------------------------------
Real Estate Investment 38,000 Apartment Investment & Management
Trusts Company (Class A) 1,439,250 0.7
19,207 Avalonbay Communities, Inc. 662,642 0.4
40,000 Colonial Properties Trust 982,500 0.5
64,000 Developers Diversified Realty Corporation 832,000 0.4
52,000 Duke-Weeks Realty Corporation 1,030,250 0.5
35,000 Essex Property Trust, Inc. 1,190,000 0.6
35,000 Highwoods Properties, Inc. 796,250 0.4
30,000 Mack-Cali Realty Corporation 763,125 0.4
50,000 Simon Property Group, Inc. 1,234,375 0.6
----------- -----
8,930,392 4.5
------------------------------------------------------------------------------------------------------------------
Utilities 77,000 Reliant Energy, Inc. 1,756,562 0.9
------------------------------------------------------------------------------------------------------------------
Utilities--Electric 40,000 American Electric Power Company, Inc. 1,340,000 0.7
60,000 Carolina Power & Light Company 1,935,000 1.0
83,000 Cinergy Corp. 2,064,625 1.1
63,000 Consolidated Edison, Inc. 2,059,313 1.0
105,000 Edison International 3,045,000 1.5
56,000 FPL Group, Inc. 2,362,500 1.2
44,000 KeySpan Corporation 1,031,250 0.5
50,000 NSTAR 2,096,875 1.1
96,000 New Century Energies, Inc. 2,778,000 1.4
120,000 Northern States Power Company 2,310,000 1.2
----------- -----
21,022,563 10.7
------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Common Stocks Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
United States Utilities--Gas Pipeline 69,000 Columbia Energy Group $ 4,485,000 2.3%
(concluded) 50,000 El Paso Energy Corporation 1,612,500 0.8
------------ -----
6,097,500 3.1
------------------------------------------------------------------------------------------------------------------
Utilities--Natural Gas 88,000 Enron Corp. 5,934,500 3.0
78,197 Sempra Energy 1,451,532 0.8
35,000 The Williams Companies, Inc. 1,356,250 0.7
------------ -----
8,742,282 4.5
------------------------------------------------------------------------------------------------------------------
Utilities-- 50,000 Bell Atlantic Corporation 3,096,875 1.6
Telecommunications 52,000 BellSouth Corporation 2,447,250 1.2
40,000 GTE Corporation 2,932,500 1.5
102,648 SBC Communications Inc. 4,426,695 2.3
------------ -----
12,903,320 6.6
------------------------------------------------------------------------------------------------------------------
Utilities--Water 76,000 American Water Works Company, Inc. 1,843,000 0.9
55,500 Philadelphia Suburban Corporation 1,113,469 0.6
------------ -----
2,956,469 1.5
------------------------------------------------------------------------------------------------------------------
Total Investments in North America 169,209,693 86.2
====================================================================================================================================
Total Investments in Common Stocks
(Cost--$138,621,089) 183,222,706 93.3
====================================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
====================================================================================================================================
<S> <C> <C> <C> <C>
Repurchase $3,920,000 Warburg Dillon Read LLC, purchased
Agreements* on 1/31/2000 to yield 5.69% to 2/01/2000 3,920,000 2.0
------------------------------------------------------------------------------------------------------------------
US Government 3,000,000 Federal Home Loan Mortgage Corporation,
Agency Obligations** 5.48% due 2/15/2000 2,993,150 1.5
------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Costs--$6,913,150) 6,913,150 3.5
====================================================================================================================================
Total Investments (Cost--$145,534,239) 190,135,856 96.8
Other Assets Less Liabilities 6,305,987 3.2
------------ -----
Net Assets $196,441,843 100.0%
============ =====
====================================================================================================================================
</TABLE>
(a) 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 reflects the discount rate paid at the time of
purchase by the Fund.
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of January 31, 2000
===========================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$145,534,239)................ $ 190,135,856
Cash................................................................. 65,750
Foreign cash......................................................... 740,188
Receivables:
Securities sold.................................................... $ 6,088,642
Dividends.......................................................... 489,600
Beneficial interest sold........................................... 37,367 6,615,609
-----------
Prepaid registration fees and other assets........................... 44,751
-------------
Total assets......................................................... 197,602,154
-------------
===========================================================================================================================
Liabilities: Payables:
Beneficial interest redeemed....................................... 838,556
Investment adviser................................................. 103,437
Distributor........................................................ 81,021 1,023,014
-----------
Accrued expenses and other liabilities............................... 137,297
-------------
Total liabilities.................................................... 1,160,311
-------------
===========================================================================================================================
Net Assets: Net assets .......................................................... $ 196,441,843
=============
===========================================================================================================================
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized................................ $ 167,637
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized................................ 469,379
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized................................ 36,916
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized................................ 872,641
Paid-in capital in excess of par..................................... 149,091,238
Undistributed investment income--net.................................. 356,312
Undistributed realized capital gains on investments and
foreign currency transactions--net.................................... 867,235
Unrealized appreciation on investments and foreign currency
transactions--net..................................................... 44,580,485
-------------
Net assets........................................................... $ 196,441,843
=============
===========================================================================================================================
Net Asset Class A--Based on net assets of $21,291,978 and 1,676,371 shares
Value: of beneficial interest outstanding................................... $ 12.70
=============
Class B--Based on net assets of $59,717,721 and 4,693,790 shares
of beneficial interest outstanding................................... $ 12.72
=============
Class C--Based on net assets of $4,644,197 and 369,159 shares
of beneficial interest outstanding................................... $ 12.58
=============
Class D--Based on net assets of $110,787,947 and 8,726,408 shares
of beneficial interest outstanding................................... $ 12.70
=============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
8 & 9
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
STATEMENT OF OPERATIONS
<TABLE>
<S> <C> <C> <C>
For the Six Months Ended January 31, 2000
===========================================================================================================================
Investment Dividends (net of $21,807 foreign withholding tax)................... $ 3,033,955
Income: Interest and discount earned......................................... 628,786
-------------
Total income......................................................... 3,662,741
-------------
===========================================================================================================================
Expenses: Investment advisory fees............................................. $ 668,401
Account maintenance and distribution fees--Class B.................... 353,633
Account maintenance fees--Class D..................................... 153,688
Transfer agent fees--Class D.......................................... 88,323
Transfer agent fees--Class B.......................................... 58,068
Accounting services.................................................. 41,430
Printing and shareholder reports..................................... 36,406
Professional fees.................................................... 28,656
Registration fees.................................................... 27,197
Account maintenance and distribution fees--Class C.................... 25,990
Transfer agent fees--Class A.......................................... 17,164
Custodian fees....................................................... 13,136
Trustees' fees and expenses.......................................... 11,888
Transfer agent fees--Class C.......................................... 4,495
Pricing fees......................................................... 361
Other................................................................ 3,535
------------
Total expenses....................................................... 1,532,371
-------------
Investment income--net................................................ 2,130,370
-------------
===========================================================================================================================
Realized & Realized gain from:
Unrealized Investments--net.................................................... 1,096,219
Gain Foreign currency transactions--net.................................. 9,854 1,106,073
(Loss) On ------------
Investments Change in unrealized appreciation/depreciation on:
& Foreign Investments--net.................................................... (16,210,413)
Currency Foreign currency transactions--net.................................. (19,110) (16,229,523)
Transactions ------------ -------------
- --Net: Net Decrease in Net Assets Resulting from Operations................. $ (12,993,080)
=============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 2000 1999
===========================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net........................................... $ 2,130,370 $ 4,265,532
Realized gain on investments and foreign currency
transactions--net................................................ 1,106,073 13,630,909
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net............... (16,229,523) 9,183,280
------------ ------------
Net increase (decrease) in net assets resulting
from operations................................................. (12,993,080) 27,079,721
------------ ------------
===========================================================================================================================
Dividends & Investment income--net:
Distributions to Class A....................................................... (293,150) (615,334)
Shareholders: Class B....................................................... (503,239) (1,107,518)
Class C....................................................... (38,007) (71,147)
Class D....................................................... (1,360,656) (2,447,831)
Realized gain on investments--net:
Class A....................................................... (1,077,347) (3,916,159)
Class B....................................................... (3,294,547) (11,960,245)
Class C....................................................... (242,920) (691,392)
Class D....................................................... (5,531,722) (16,343,239)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders .................................. (12,341,588) (37,152,865)
------------ ------------
===========================================================================================================================
Beneficial Net increase (decrease) in net assets derived from
Interest beneficial interest transactions................................ (12,120,146) 41,649,071
Transactions: ------------ ------------
===========================================================================================================================
Net Assets: Total increase (decrease) in net assets......................... (37,454,814) 31,575,927
Beginning of period............................................. 233,896,657 202,320,730
------------ ------------
End of period*.................................................. $196,441,843 $233,896,657
============ ============
===========================================================================================================================
* Undistributed investment income--net........................... $ 356,312 $ 420,994
============ ============
===========================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A+
The following per share data and --------------------------------------------------------------
ratios have been derived For the
from information provided in the Six Months
financial statements. Ended For the Year Ended July 31,
January 31, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 14.27 $ 15.36 $ 15.21 $ 12.43 $ 12.24
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ..................... .16 .35 .39 .38 .38
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .......................... (.94) 1.42 1.37 4.17 1.55
-------- -------- -------- -------- --------
Total from investment operations ........... (.78) 1.77 1.76 4.55 1.93
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .................. (.17) (.36) (.39) (.39) (.36)
Realized gain on investments--net ....... (.62) (2.50) (1.22) (1.38) (1.38)
-------- -------- -------- -------- --------
Total dividends and distributions .......... (.79) (2.86) (1.61) (1.77) (1.74)
-------- -------- -------- -------- --------
Net asset value, end of period ............. $ 12.70 $ 14.27 $ 15.36 $ 15.21 $ 12.43
======== ======== ======== ======== ========
=============================================================================================================================
Total Based on net asset value per share ......... (5.54%)++ 14.15% 12.03% 40.42% 16.98%
Investment ======== ======== ======== ======== ========
Return:**
=============================================================================================================================
Ratios to Expenses ................................... .89%* .87% .88% .90% 1.04%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ..................... 2.39%* 2.50% 2.51% 2.87% 3.04%
=============================================================================================================================
Supplemental Net assets, end of period (in thousands) ... $ 21,292 $ 25,477 $ 24,233 $ 28,940 $ 18,106
Data: ======== ======== ======== ======== ========
Portfolio turnover ......................... 5.76% 20.11% 32.66% 14.29% 26.42%
======== ======== ======== ======== ========
=============================================================================================================================
<CAPTION>
Class B+
The following per share data and --------------------------------------------------------------
ratios have been derived For the
from information provided in the Six Months
financial statements. Ended For the Year Ended July 31,
January 31, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 14.29 $ 15.38 $ 15.22 $ 12.44 $ 12.23
Operating -------- -------- -------- -------- --------
Performance: Investment income--net ..................... .09 .21 .23 .25 .26
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .......................... (.94) 1.41 1.38 4.16 1.55
-------- -------- -------- -------- --------
Total from investment operations ........... (.85) 1.62 1.61 4.41 1.81
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net .................. (.10) (.21) (.23) (.25) (.22)
Realized gain on investments--net ....... (.62) (2.50) (1.22) (1.38) (1.38)
-------- -------- -------- -------- --------
Total dividends and distributions .......... (.72) (2.71) (1.45) (1.63) (1.60)
-------- -------- -------- -------- --------
Net asset value, end of period ............. $ 12.72 $ 14.29 $ 15.38 $ 15.22 $ 12.44
======== ======== ======== ======== ========
=============================================================================================================================
Total Based on net asset value per share ......... (6.04%)++ 12.96% 10.94% 38.90% 15.89%
Investment ======== ======== ======== ======== ========
Return:**
=============================================================================================================================
Ratios Expenses ................................... 1.90%* 1.89% 1.90% 1.94% 2.08%
to Average ======== ======== ======== ======== ========
Net Assets: Investment income--net ..................... 1.38%* 1.48% 1.50% 1.89% 2.06%
======== ======== ======== ======== ========
=============================================================================================================================
Supplemental Net assets, end of period (in thousands) ... $ 59,718 $ 75,330 $ 73,067 $ 93,509 $ 96,461
Data: ======== ======== ======== ======== ========
Portfolio turnover ......................... 5.76% 20.11% 32.66% 14.29% 26.42%
======== ======== ======== ======== ========
=============================================================================================================================
<CAPTION>
Class C+
The following per share data and --------------------------------------------------------------
ratios have been derived For the
from information provided in the Six Months
financial statements. Ended For the Year Ended July 31,
January 31, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 14.14 $ 15.25 $ 15.11 $ 12.37 $ 12.20
Operating ------- ------- ------- ------- -------
Performance: Investment income--net ..................... .09 .20 .23 .24 .24
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .......................... (.93) 1.40 1.37 4.13 1.55
------- ------- ------- ------- -------
Total from investment operations ........... (.84) 1.60 1.60 4.37 1.79
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net .................. (.10) (.21) (.24) (.25) (.24)
Realized gain on investments--net ....... (.62) (2.50) (1.22) (1.38) (1.38)
------- ------- ------- ------- -------
Total dividends and distributions .......... (.72) (2.71) (1.46) (1.63) (1.62)
------- ------- ------- ------- -------
Net asset value, end of period ............. $ 12.58 $ 14.14 $ 15.25 $ 15.11 $ 12.37
======= ======= ======= ======= =======
=============================================================================================================================
Total Based on net asset value per share ......... (6.03%)++ 12.96% 10.96% 38.84% 15.78%
Investment ======= ======= ======= ======= =======
Return:**
=============================================================================================================================
Ratios Expenses ................................... 1.92%* 1.90% 1.90% 1.95% 2.08%
to Average ======= ======= ======= ======= =======
Net Assets: Investment income--net ..................... 1.38%* 1.45% 1.47% 1.83% 1.91%
======= ======= ======= ======= =======
=============================================================================================================================
Supplemental Net assets, end of period (in thousands) ... $ 4,644 $ 5,347 $ 4,379 $ 3,025 $ 1,953
Data: ======= ======= ======= ======= =======
Portfolio turnover ......................... 5.76% 20.11% 32.66% 14.29% 26.42%
======= ======= ======= ======= =======
=============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class D+
The following per share data and ---------------------------------------------------------------
ratios have been derived For the
from information provided in the Six Months
financial statements. Ended For the Year Ended July 31,
January 31, ------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ....... $ 14.27 $ 15.36 $ 15.20 $ 12.43 $ 12.24
Operating --------- --------- --------- -------- --------
Performance: Investment income--net ..................... .15 .32 .35 .35 .34
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .......................... (.95) 1.41 1.38 4.16 1.57
--------- --------- --------- -------- --------
Total from investment operations ........... (.80) 1.73 1.73 4.51 1.91
--------- --------- --------- -------- --------
Less dividends and distributions:
Investment income--net .................. (.15) (.32) (.35) (.36) (.34)
Realized gain on investments--net ....... (.62) (2.50) (1.22) (1.38) (1.38)
--------- --------- --------- -------- --------
Total dividends and distributions .......... (.77) (2.82) (1.57) (1.74) (1.72)
--------- --------- --------- -------- --------
Net asset value, end of period ............. $ 12.70 $ 14.27 $ 15.36 $ 15.20 $ 12.43
========= ========= ========= ======== ========
==============================================================================================================================
Total Based on net asset value per share ......... (5.66%)++ 13.88% 11.84% 39.99% 16.73%
Investment ========= ========= ========= ======== ========
Return:**
==============================================================================================================================
Ratios Expenses ................................... 1.14%* 1.12% 1.12% 1.15% 1.28%
to Average ========= ========= ========= ======== ========
Net Assets: Investment income--net ..................... 2.14%* 2.26% 2.25% 2.62% 2.62%
========= ========= ========= ======== ========
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) ... $ 110,788 $ 127,743 $ 100,642 $ 74,577 $ 44,691
Data: ========= ========= ========= ======== ========
Portfolio turnover ......................... 5.76% 20.11% 32.66% 14.29% 26.42%
========= ========= ========= ======== ========
==============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
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. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles, which may require the use of
management accruals and estimates. 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.
(a) Valuation of investments--Portfolio securities that 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
that 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
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). 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 money market securities pursuant
to repurchase agreements. Under such agreements, the counterparty 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 additional securities daily to ensure that the contract is
fully collateralized. If the counterparty defaults and the fair value of the
collateral declines liquidation of the collateral by the Fund may be delayed or
limited.
(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.
o Financial futures contracts--The Fund may purchase or sell financial 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
14 & 15
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
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.
o 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.
o 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.
o 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 ("MLFD" or the "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is 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
.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......................... .25% .75%
Class C ........................ .25% .75%
Class D......................... .25% --
- ------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("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, 2000, MLFD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class A......................... $ 18 $ 349
Class D......................... $636 $8,441
- --------------------------------------------------------------------------------
For the six months ended January 31, 2000, MLPF&S received contingent deferred
sales charges of $59,922 and $1,973 relating to transactions in Class B and
Class C Shares, respectively. Furthermore, MLPF&S received contingent deferred
sales charges of $362 relating to transactions subject to front-end sales
waivers in Class D Shares.
Financial Data Services, Inc. ("FDS"), 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, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 2000 were $12,597,882 and $19,635,263, respectively.
Net realized gains for the six months ended January 31, 2000 and net unrealized
gains (losses) as of January 31, 2000 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains Gains (Losses)
- --------------------------------------------------------------------------------
Long-term investments.......... $ 1,095,991 $ 44,601,617
Short-term investments......... 228 --
Foreign currency transactions.. 9,854 (21,132)
----------- -------------
Total.......................... $ 1,106,073 $ 44,580,485
=========== =============
- --------------------------------------------------------------------------------
As of January 31, 2000, net unrealized appreciation for Federal income tax
purposes aggregated $44,601,617, of which $53,298,003 related to appreciated
securities and $8,696,386 related to depreciated securities. At January 31,
2000, the aggregate cost of investments for Federal income tax purposes was
$145,534,239.
16 & 17
<PAGE>
Merrill Lynch Strategic Dividend Fund, January 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Beneficial Interest Transactions:
Net increase (decrease) in net assets derived from beneficial interest
transactions was $(12,120,146) and $41,649,071 for the six months ended January
31, 2000 and for the year ended July 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 107,257 $ 1,441,063
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 91,689 1,189,887
--------------- ---------------
Total issued ............................. 198,946 2,630,950
Shares redeemed .......................... (307,421) (4,107,475)
--------------- ---------------
Net decrease ............................. (108,475) $ (1,476,525)
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 446,426 $ 6,159,548
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 300,330 3,873,661
--------------- ---------------
Total issued ............................. 746,756 10,033,209
Shares redeemed .......................... (539,325) (7,578,565)
--------------- ---------------
Net increase ............................. 207,431 $ 2,454,644
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 557,416 $ 7,594,225
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 239,686 3,119,823
--------------- ---------------
Total issued ............................. 797,102 10,714,048
Automatic conversion of shares ........... (223,318) (2,982,979)
Shares redeemed .......................... (1,150,588) (15,250,241)
--------------- ---------------
Net decrease ............................. (576,804) $ (7,519,172)
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 2,525,084 $ 34,620,181
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 804,138 10,362,932
--------------- ---------------
Total issued ............................. 3,329,222 44,983,113
Automatic conversion of shares ........... (767,206) (10,719,733)
Shares redeemed .......................... (2,043,427) (28,760,574)
--------------- ---------------
Net increase ............................. 518,589 $ 5,502,806
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 52,606 $ 707,671
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 18,432 237,316
--------------- ---------------
Total issued ............................. 71,038 944,987
Shares redeemed .......................... (79,918) (1,050,468)
--------------- ---------------
Net decrease ............................. (8,880) $ (105,481)
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 245,472 $ 3,350,198
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 50,462 644,271
--------------- ---------------
Total issued ............................. 295,934 3,994,469
Shares redeemed .......................... (205,083) (2,865,334)
--------------- ---------------
Net increase ............................. 90,851 $ 1,129,135
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended January 31, 2000 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 682,489 $ 9,193,116
Automatic conversion of shares ........... 223,674 2,982,979
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 447,620 5,809,408
--------------- ---------------
Total issued ............................. 1,353,783 17,985,503
Shares redeemed .......................... (1,581,097) (21,004,471)
--------------- ---------------
Net decrease ............................. (227,314) $ (3,018,968)
=============== ===============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended July 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 2,152,445 $ 30,438,636
Automatic conversion of shares ........... 768,031 10,719,733
Shares issued to shareholders
in reinvestment of dividends
and distributions ........................ 1,207,415 15,577,811
--------------- ---------------
Total issued ............................. 4,127,891 56,736,180
Shares redeemed .......................... (1,727,866) (24,173,694)
--------------- ---------------
Net increase ............................. 2,400,025 $ 32,562,486
=============== ===============
- --------------------------------------------------------------------------------
5. Commitments:
At January 31, 2000, the Fund entered into foreign exchange contracts under
which it had agreed to sell various foreign currencies with an approximate value
of $1,410,000.
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
Ronald W. Forbes, Trustee
Cynthia A. Montgomery, Trustee
Charles C. Reilly, Trustee
Kevin A. Ryan, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Robert C. Doll, Senior Vice President
Walter D. Rogers, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
18 & 19
<PAGE>
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--1/00
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