-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D0mKmRKCEhLW/xwOgwJy0UaBWGKC9QJHSw+/qj2Hil2yYfmW14XVkwmVCUxjzJjW w3v7XP0gjDWv4XnazCl+Ug== 0001005477-99-002911.txt : 19990623 0001005477-99-002911.hdr.sgml : 19990623 ACCESSION NUMBER: 0001005477-99-002911 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH STRATEGIC DIVIDEND FUND CENTRAL INDEX KEY: 0000814507 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NJ FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-05178 FILM NUMBER: 99649912 BUSINESS ADDRESS: STREET 1: 800 SCUDDERS MILL ROAD CITY: PLAINSBORO STATE: NJ ZIP: 08536 BUSINESS PHONE: (609)282-2 MAIL ADDRESS: STREET 1: MERRILL LYNCH ASSET MANAGEMENT STREET 2: P.O. BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 FORMER COMPANY: FORMER CONFORMED NAME: MERRILL LYNCH DIVIDEND APPRECIATION FUND DATE OF NAME CHANGE: 19870803 N-30B-2 1 QUARTERLY REPORT MERRILL LYNCH STRATEGIC DIVIDEND FUND [GRAPHIC OMITTED] STRATEGIC Performance Quarterly Report April 30, 1999 MERRILL LYNCH STRATEGIC DIVIDEND FUND Sector Representation as a Percentage of Equities as of April 30, 1999 A pie graph depicting sector representation as a percentage of equities as of April 30, 1999 Utilities 26.6% Capital Goods 15.1% Energy 13.7% Basic Industries 9.3% Consumer 7.5% Financial Services 27.8% US Common Stock Investments as of April 30, 1999 S&P Fund 500** - -------------------------------------------------------------------------------- Average Capitalization (in billions) $29.2 $97.2 - -------------------------------------------------------------------------------- Price/Book Value 4.2 4.9 - -------------------------------------------------------------------------------- Price/Earnings Ratio*** 27.2 30.0 - -------------------------------------------------------------------------------- Yield Based on Current Dividend 2.8%* 1.2% - -------------------------------------------------------------------------------- * Net yield after expenses for 12-months ended 4/30/99, according to Lipper Analytical Services. ** An unmanaged broad-based index comprised of common stocks. *** Based on trailing 12-month earnings. Merrill Lynch Strategic Dividend Fund, April 30, 1999 DEAR SHAREHOLDER There were some conflicting signals regarding the future direction of the US economy during the quarter ended April 30, 1999. However, on balance the economic outlook continued to be positive. The US economic expansion is ongoing, especially in the consumer sector. Economic growth is not occurring at inflationary rates, although the Organization for Petroleum Exporting Countries (OPEC) successfully engineered a near-term increase in the price of crude oil. Against this backdrop, the US Federal Reserve Board kept monetary policy on hold. Outside of the United States, signs of growth are less apparent in other major industrial economies. Although the crisis in Yugoslavia has raised serious geopolitical concerns, it was not a significant factor in the economic or investment outlook. There are not yet clear signs that Japan's economy is improving, and the emerging economies remain tentative. In the US capital markets, long-term interest rates stabilized somewhat by April quarter-end after rising thus far in 1999. Although the spread between yields on Treasury securities and corporate issues of similar maturities has narrowed somewhat, it remains wide by historic standards. However, the major news in the US capital markets was again in the stock market. As the US stock market reached new highs, the advance broadened beyond relatively few large-capitalization technology stocks to the previously languishing cyclical sectors. Portfolio Matters For the three months ended April 30, 1999, Merrill Lynch Strategic Dividend Fund's Class A, Class B, Class C and Class D Shares had total returns of +9.33%, +8.98%, +9.01% and +9.28%, respectively. (Results shown do not reflect sales charges and would be lower if sales charges were included. For complete performance information, see pages 4 and 5 of this report to shareholders.) The Fund's performance for the April quarter compared favorably with the +4.67% total return posted by the unmanaged Standard & Poor's 500 Index (S&P 500). The Fund also outperformed the +6.77% total return of the 200 highest-yielding stocks in the S&P 500, which constitute the Fund's primary investment focus. Higher-yielding stocks fared well in the April quarter. Investor sentiment appeared to shift from growth stocks to value stocks, specifically those with low price/earnings ratios, low downside risk and high dividend yields. Factors driving this rotation in investor sentiment appear to be expectations of higher interest rates, rising inflation and concerns about the sustainability of corporate profit growth. Stocks in the basic industrials, energy, capital goods--cyclical and financial sectors produced the best relative performances in the quarter, significantly outperforming the broad market. Since we seek to obtain a better-than-market dividend yield primarily from equity holdings, we have historically maintained a heavy weighting in these sectors of the market, with approximately 60% of net assets invested in these sectors at April quarter-end. We use traditional tools of value investing, seeking to enhance the Fund's returns through careful stock selection of financially strong and generally large market capitalization companies. We buy stocks based on attractive valuations that always include an attractive dividend yield relative to their respective industry but most often also sell at attractive price/earnings ratios and low price/book values. We believe this style of investing will become more important as stock market returns move closer to historical trends where dividend yields will again become a far larger component of total return. Over the near term, a rising interest rate environment would be negative for the Fund's electric utility holdings (which at April quarter-end accounted for about 9% of net assets). Since many are already trading at 20-year lows on a price/earnings basis relative to the S&P 500, we do not expect much downside from current levels. In addition, the Fund is positioned to benefit from a potential pickup in inflation with its even larger energy position (at about 12% of net assets) where values also are at historically attractive levels relative to the market. If inflation picks up, which now appears more likely, we expect this sector to positively contribute to Fund performance. Additionally, merger activity in both sectors is likely to continue to have a positive impact for investors. We believe potential exists for positive earnings surprises from these companies over the next several quarters. Investment activities in the April quarter included initiating two new positions. Reliant Energy, Inc. is a combination electric and gas utility, which through its major subsidiary Houston Power & Light, provides electricity in its hometown and along the Texas Gulf Coast. The company also operates three natural gas utilities, is engaged in marketing of unregulated retail energy products and services, and has investments in electric utility properties in Latin America. Going forward, we expect earnings to grow at better than the industry average. Coupled with the attractive dividend yield, we believe the shares are attractive on a total return basis. Whirlpool Corporation, our other new holding, is a major manufacturer of a full line of appliances for home and commercial use. The company's products are marketed in more than 170 countries under various brand names. About 61% of total sales were made in North America and 27% in Europe. The balance is accounted for by Latin America, principally Brazil, and Asia. Through a combination of improved product mix, manufacturing efficiencies and lower material costs, profit margins have widened and shipments are on the rise. At current levels, the stock has attractive total return potential. Other transactions in the April quarter included eliminating three investments that no longer met our expectations and taking partial capital gains in five others. We also added to our holdings in two existing positions, New Century Energies Inc. and State Street Corporation. In Conclusion We thank you for your investment in Merrill Lynch Strategic Dividend Fund, and we look forward to reviewing our outlook and strategy with you again in our upcoming annual report to shareholders. Sincerely, /s/ Terry K. Glenn Terry K. Glenn President and Trustee /s/ Walter D. Rogers Walter D. Rogers Senior Vice President and Portfolio Manager June 9, 1999 ================================================================================ After more than 20 years of service, Arthur Zeikel recently retired as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one of the country's most respected leaders in asset management and presided over the growth of Merrill Lynch's asset management business. During his tenure, client assets under management grew from $300 million to over $500 billion. Mr. Zeikel will remain on Merrill Lynch Strategic Dividend Fund's Board of Trustees. We are pleased to announce that Terry K. Glenn has been elected President and Trustee of the Fund. Mr. Glenn has held the position of Executive Vice President of MLAM since 1983. Mr. Zeikel's colleagues at MLAM join the Fund's Board of Trustees in wishing him well in his retirement from Merrill Lynch and are pleased that he will continue as a member of the Fund's Board of Trustees. ================================================================================ 2 & 3 Merrill Lynch Strategic Dividend Fund, April 30, 1999 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. Recent Performance Results
Ten Years/ 12 Month 3 Month Since Inception Total Return Total Return Total Return ======================================================================================================================== ML Strategic Dividend Fund Class A Shares* +10.67% +9.33% +264.35% - ------------------------------------------------------------------------------------------------------------------------ ML Strategic Dividend Fund Class B Shares* + 9.44 +8.98 +228.72 - ------------------------------------------------------------------------------------------------------------------------ ML Strategic Dividend Fund Class C Shares* + 9.42 +9.01 +131.15 - ------------------------------------------------------------------------------------------------------------------------ ML Strategic Dividend Fund Class D Shares* +10.32 +9.28 +139.71 - ------------------------------------------------------------------------------------------------------------------------ Standard & Poor's 500 Index** +21.82 +4.67 +461.10/+214.47 ========================================================================================================================
* 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 Class A & Class B Shares, for the ten years ended 4/30/99 and Class C & Class D Shares, from 10/21/94 to 4/30/99. ** An unmanaged broad-based index comprised of common stocks. Ten years/since inception total returns are for the ten years ended 4/30/99 and from 10/21/94 to 4/30/99, respectively. Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ Year Ended 3/31/99 + 2.55% - 2.83% - -------------------------------------------------------------------------------- Five Years Ended 3/31/99 +19.13 +17.85 - -------------------------------------------------------------------------------- Ten Years Ended 3/31/99 +13.32 +12.71 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ================================================================================ Class B Shares* ================================================================================ Year Ended 3/31/99 + 1.53% - 1.84% - -------------------------------------------------------------------------------- Five Years Ended 3/31/99 +17.90 +17.90 - -------------------------------------------------------------------------------- Ten Years Ended 3/31/99 +12.16 +12.16 - -------------------------------------------------------------------------------- * Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. ** Assuming payment of applicable contingent deferred sales charge. ================================================================================ % Return % Return Without CDSC With CDSC** ================================================================================ Class C Shares* ================================================================================ Year Ended 3/31/99 + 1.44% + 0.60% - -------------------------------------------------------------------------------- Inception (10/21/94) through 3/31/99 +18.82 +18.82 - -------------------------------------------------------------------------------- * 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 3/31/99 + 2.35% - 3.02% - -------------------------------------------------------------------------------- Inception (10/21/94) through 3/31/99 +19.79 +18.34 - -------------------------------------------------------------------------------- * Maximum sales charge is 5.25%. ** Assuming maximum sales charge. 4 & 5 Merrill Lynch Strategic Dividend Fund, April 30, 1999 SCHEDULE OF INVESTMENTS (in US dollars)
Percent Shares of Net EUROPE Industries Held Common Stocks Cost Value Assets ==================================================================================================================================== Netherlands Oil--International 125,000 Royal Dutch Petroleum Company (NY Registered Shares) $ 4,284,612 $ 7,335,937 3.1% ------------------------------------------------------------------------------------------------------------ Total Investments in the Netherlands 4,284,612 7,335,937 3.1 ==================================================================================================================================== United Kingdom Banking 200,000 National Westminster Bank PLC 3,791,943 4,820,340 2.1 ------------------------------------------------------------------------------------------------------------ Oil--International 30,504 BP Amoco PLC (ADR)(a) 1,370,665 3,452,671 1.5 ------------------------------------------------------------------------------------------------------------ Steel 700,000 British Steel PLC 1,938,756 1,665,142 0.7 ------------------------------------------------------------------------------------------------------------ Total Investments in the United Kingdom 7,101,364 9,938,153 4.3 ==================================================================================================================================== Total Investments in Europe 11,385,976 17,274,090 7.4 ==================================================================================================================================== NORTH AMERICA ==================================================================================================================================== United States Aerospace & Defense 20,000 Rockwell International Corporation 803,055 1,032,500 0.4 60,000 TRW Inc. 1,663,737 2,516,250 1.1 ----------- ----------- ---- 2,466,792 3,548,750 1.5 ------------------------------------------------------------------------------------------------------------ Automobile 70,000 Ford Motor Company 1,318,007 4,475,625 1.9 ------------------------------------------------------------------------------------------------------------ Automotive 72,000 Arvin Industries, Inc. 1,656,934 2,637,000 1.1 Equipment & Tires 50,000 Cooper Tire & Rubber Company 1,202,300 1,096,875 0.5 60,000 Dana Corporation 1,649,850 2,827,500 1.2 ----------- ----------- ---- 4,509,084 6,561,375 2.8 ------------------------------------------------------------------------------------------------------------ Banking 145,000 The Bank of New York Company, Inc. 4,329,860 5,800,000 2.5 90,000 The Chase Manhattan Corporation 5,600,772 7,447,500 3.2 46,000 Mellon Bank Corporation 990,205 3,418,375 1.5 34,500 Mercantile Bancorporation Inc. 1,002,055 1,966,500 0.8 30,000 National City Corporation 2,011,800 2,152,500 0.9 78,000 PNC Bank Corp. 4,070,243 4,514,250 1.9 40,000 State Street Corporation 2,655,414 3,500,000 1.5 26,880 SunTrust Banks, Inc. 1,447,180 1,921,920 0.8 ----------- ----------- ---- 22,107,529 30,721,045 13.1 ------------------------------------------------------------------------------------------------------------ Business Services 52,000 The Dun & Bradstreet Corporation 1,378,715 1,911,000 0.8 ------------------------------------------------------------------------------------------------------------ Capital Goods 30,000 General Electric Company 724,669 3,165,000 1.4 28,000 Minnesota Mining and Manufacturing Company (3M) 1,608,098 2,492,000 1.1 68,000 Ogden Corporation 1,531,759 1,755,250 0.7 ----------- ----------- ---- 3,864,526 7,412,250 3.2 ------------------------------------------------------------------------------------------------------------ Chemicals 23,000 The Dow Chemical Company 1,369,880 3,017,313 1.3 40,000 E.I. du Pont de Nemours and Company 1,329,525 2,825,000 1.2 ----------- ----------- ---- 2,699,405 5,842,313 2.5 ------------------------------------------------------------------------------------------------------------ Consumer--Durables 63,000 Whirlpool Corporation 3,323,062 4,181,625 1.8 ------------------------------------------------------------------------------------------------------------ Drugs 50,000 American Home Products Corporation 1,721,675 3,050,000 1.3 52,000 Bristol-Myers Squibb Company 593,629 3,305,250 1.4 ----------- ----------- ---- 2,315,304 6,355,250 2.7 ------------------------------------------------------------------------------------------------------------ Foods 40,000 General Mills, Inc. 2,938,894 2,925,000 1.2 55,000 The Quaker Oats Company 2,983,189 3,550,938 1.5 ----------- ----------- ---- 5,922,083 6,475,938 2.7 ------------------------------------------------------------------------------------------------------------ Household Products 24,000 The Clorox Company 728,490 2,769,000 1.2 ------------------------------------------------------------------------------------------------------------ Insurance 65,000 American General Corporation 1,346,718 4,810,000 2.1 30,000 Lincoln National Corporation 1,275,150 2,881,875 1.2 85,000 Ohio Casualty Corporation 2,708,281 3,145,000 1.3 ----------- ----------- ---- 5,330,149 10,836,875 4.6 ------------------------------------------------------------------------------------------------------------ Merchandising 25,000 J.C. Penney Company, Inc. 1,157,975 1,140,625 0.5 ------------------------------------------------------------------------------------------------------------ Oil--Domestic 28,000 Atlantic Richfield Company (ARCO) 1,584,596 2,350,250 1.0 90,000 Occidental Petroleum Corporation 2,323,525 1,816,875 0.8 50,000 Phillips Petroleum Company 1,731,105 2,531,250 1.1 ----------- ----------- ---- 5,639,226 6,698,375 2.9 ------------------------------------------------------------------------------------------------------------ Oil--International 30,000 Exxon Corporation 892,384 2,491,875 1.1 40,000 Mobil Corporation 915,150 4,190,000 1.8 50,000 Texaco Inc. 1,177,506 3,137,500 1.3 ----------- ----------- ---- 2,985,040 9,819,375 4.2 ------------------------------------------------------------------------------------------------------------ Paper & Forest Products 66,000 Union Camp Corporation 3,963,011 5,238,750 2.2 60,000 Weyerhaeuser Company 2,666,100 4,027,500 1.7 ----------- ----------- ---- 6,629,111 9,266,250 3.9 ------------------------------------------------------------------------------------------------------------ Real Estate Investment 38,000 Apartment Investment & Management Trusts Company (Class A) 1,151,438 1,522,375 0.6 19,207 Avalonbay Communities, Inc. 505,756 672,245 0.3 40,000 Colonial Properties Trust 1,244,488 1,095,000 0.5 20,000 Crescent Real Estate Equities Company 620,058 447,500 0.2 64,000 Developers Diversified Realty Corporation 1,296,294 1,012,000 0.4 52,000 Duke Realty Investments, Inc. 1,265,836 1,222,000 0.5 35,000 Essex Property Trust, Inc. 844,248 1,104,688 0.5 35,000 Highwoods Properties, Inc. 1,128,127 901,250 0.4 30,000 Mack-Cali Realty Corporation 1,126,800 928,125 0.4 ----------- ----------- ---- 9,183,045 8,905,183 3.8 ------------------------------------------------------------------------------------------------------------ Steel 55,000 Carpenter Technology Corporation 1,747,599 1,722,187 0.7 ------------------------------------------------------------------------------------------------------------
6 & 7 Merrill Lynch Strategic Dividend Fund, April 30, 1999 SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Percent NORTH AMERICA Shares of Net (concluded) Industries Held Common Stocks Cost Value Assets ==================================================================================================================================== United States Utilities 77,000 Reliant Energy, Inc. $ 2,188,848 $ 2,180,063 0.9% (concluded) ------------------------------------------------------------------------------------------------------------ Utilities--Electric 40,000 American Electric Power Company, Inc. 1,262,400 1,657,500 0.7 50,000 BEC Energy 1,253,000 2,125,000 0.9 60,000 Central & South West Corporation 1,598,600 1,488,750 0.7 63,000 Consolidated Edison, Inc. 1,779,750 2,862,562 1.2 105,000 Edison International 1,759,425 2,572,500 1.1 56,000 FPL Group, Inc. 3,155,764 3,157,000 1.4 44,000 KeySpan Energy 1,120,500 1,177,000 0.5 96,000 New Century Energies, Inc. 3,189,435 3,360,000 1.4 120,000 Northern States Power Company 2,613,600 2,895,000 1.2 ------------ ------------ ----- 17,732,474 21,295,312 9.1 ------------------------------------------------------------------------------------------------------------ Utilities--Natural Gas 97,000 AGL Resources Inc. 2,102,933 1,764,187 0.7 40,000 Consolidated Natural Gas Company 1,805,775 2,380,000 1.0 44,000 Enron Corporation 2,026,319 3,311,000 1.4 78,197 Sempra Energy 2,037,272 1,622,588 0.7 50,000 Sonat Inc. 882,073 1,787,500 0.8 35,000 The Williams Companies, Inc. 1,196,528 1,653,750 0.7 ------------ ------------ ----- 10,050,900 12,519,025 5.3 ------------------------------------------------------------------------------------------------------------ Utilities-- 78,000 Ameritech Corporation 3,008,167 5,338,125 2.3 Telecommunications 50,000 Bell Atlantic Corporation 1,247,396 2,881,250 1.2 40,000 GTE Corporation 1,429,930 2,677,500 1.2 55,000 U S WEST, Inc. 1,852,675 2,877,188 1.2 ------------ ------------ ----- 7,538,168 13,774,063 5.9 ------------------------------------------------------------------------------------------------------------ Utilities--Water 76,000 American Water Works Company, Inc. 1,429,750 2,161,250 0.9 25,000 E'Town Corporation 1,010,729 998,437 0.4 55,500 Philadelphia Suburban Corporation 1,203,656 1,252,219 0.5 53,000 United Water Resources Inc. 983,294 1,103,063 0.5 ------------ ------------ ----- 4,627,429 5,514,969 2.3 ------------------------------------------------------------------------------------------------------------ Total Investments in North America 125,442,961 183,926,473 78.3 ==================================================================================================================================== Total Investments in Common Stocks 136,828,937 201,200,563 85.7 ==================================================================================================================================== Face Amount Short-Term Securities ==================================================================================================================================== Repurchase $ 9,615,000 Warburg Dillon Read LLC, 9,615,000 9,615,000 4.1 Agreements* purchased on 4/30/1999 to yield 4.88% to 5/03/1999 ------------------------------------------------------------------------------------------------------------ US Government Agency 4,000,000 Federal Home Loan Mortgage Obligations** Corporation, 4.70% due 5/10/1999 3,994,778 3,994,778 1.7 24,000,000 Federal National Mortgage Association, 4.685% due 5/18/1999 23,943,780 23,943,780 10.2 ------------------------------------------------------------------------------------------------------------ Total Investments in Short-Term Securities 37,553,558 37,553,558 16.0 ==================================================================================================================================== Total Investments $174,382,495 238,754,121 101.7 ============ Liabilities in Excess of Other Assets (3,942,363) (1.7) ------------ ----- Net Assets $234,811,758 100.0% ============ ===== ==================================================================================================================================== Class A--Based on net assets of $27,172,218 and 1,873,261 shares of beneficial interest outstanding $ 14.51 ============ Class B--Based on net assets of $86,385,757 and 5,948,219 shares of beneficial interest outstanding $ 14.52 ============ Class C--Based on net assets of $5,919,969 and 411,879 shares of beneficial interest outstanding $ 14.37 ============ Class D--Based on net assets of $115,333,814 and 7,954,483 shares of beneficial interest outstanding $ 14.50 ============ ====================================================================================================================================
(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 rates shown reflect the discount rates paid at the time of purchase by the Fund. 8 & 9 Merrill Lynch Strategic Dividend Fund, April 30, 1999 PORTFOLIO CHANGES For the Quarter Ended April 30, 1999 Additions Reliant Energy, Inc. Whirlpool Corporation Deletions Frontier Corporation PECO Energy Company UST Inc. PORTFOLIO INFORMATION As of April 30, 1999 Percent of Ten Largest Common Stock Holdings Net Assets The Chase Manhattan Corporation .................................. 3.2% Royal Dutch Petroleum Company (NY Registered Shares) ......................................... 3.1 The Bank of New York Company, Inc. ............................... 2.5 Ameritech Corporation ............................................ 2.3 Union Camp Corporation ........................................... 2.2 National Westminster Bank PLC .................................... 2.1 American General Corporation ..................................... 2.1 PNC Bank Corp. ................................................... 1.9 Ford Motor Company ............................................... 1.9 Mobil Corporation ................................................ 1.8 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 Walter D. Rogers, Senior Vice President and Portfolio Manager Donald C. Burke, Vice President and Treasurer Thomas D. Jones, III, 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 10 & 11 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--4/99 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----