MERRILL LYNCH
GROWTH FUND
FUND LOGO
Quarterly Report
July 31, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Growth Fund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH GROWTH FUND
DEAR SHAREHOLDER
During the quarter ended July 31, 1997, increasing evidence of
noninflationary economic growth boosted investor confidence. This
growing confidence was confirmed further when, as widely expected,
the Federal Reserve Board (FRB) chose to leave monetary policy
unchanged at its July 1 meeting. This confluence of positive
indicators helped produce a significant rally in the US stock
market. The unmanaged Standard & Poor's 500 Composite Average, led
by its 50 largest issues (in terms of stock market capitalization),
generated a +19.58% total return for the July quarter. A slight
decline in interest rates during the quarter resulted in a modest
positive total return for US fixed-income investments.
<PAGE>
Current consensus expectations are for the US economy's rate of
growth to lose some momentum over the balance of 1997. Although real
(inflation-adjusted) gross domestic product (GDP) growth for the
first quarter of the year was revised slightly upward to 5.9%, the
rate of real growth for the second quarter was announced at a more
sustainable 2.2% rate. At the same time, inflationary pressures
remain contained. It remains to be seen whether economic activity
continues moderate enough to rule out future FRB monetary policy
tightenings later this year.
As the July quarter drew to a close, Congress approved tax-cut and
five-year balanced budget bills. Although considered positive to
encourage savings and investment, it is uncertain how successful the
new legislation will be in reducing the Federal budget deficit in
the years ahead.
At present, it appears that the US economy is perceived favorably by
global investors for its ongoing growth and limited inflationary
pressures, as supported by the US dollar's continued strength
relative to other currencies. If economic data releases continue to
support this point of view, the outlook for the US capital markets
will remain positive.
Portfolio Matters
For the three months ended July 31, 1997, total returns for Merrill
Lynch Growth Fund's Class A, Class B, Class C and Class D Shares
were +18.17%, +17.85%, +17.88% and +18.10%, respectively,
underperforming the +19.58% return for the unmanaged Standard &
Poor's 500 Composite Index. (Fund results do not reflect sales
charges, and would be lower if sales charges were included. Complete
performance information, including average annual total returns, can
be found on pages 3--5 of this report to shareholders.)
The improvement in the Fund's absolute and relative performance
during the July quarter from the prior three-month period is largely
attributable to the performance of its energy investments. Despite a
mild winter in the United States, oil and gas consumption has been
relatively strong and oilfield activity levels have been high. The
rising drilling activity on the part of oil and gas producers has,
in turn, driven earnings growth and share price gains in the Fund's
oilfield service and equipment companies. Consistent with our long-
term thesis, these earnings gains have not been fueled by rising oil
and gas prices, which have remained relatively stable, but by a
tightening market for oilfield services.
We made no significant changes in our investment strategy during the
July quarter. Energy remains the Fund's largest sector commitment at
47.8% of net assets. During the quarter, we increased positions in
several of our existing energy holdings and added one significant
new energy position to the portfolio, Burlington Resources, Inc. As
a result of its planned friendly merger with Louisiana Land &
Exploration Company (LL&E), Burlington will emerge as a "super
independent" with a greater exploration orientation that will be
international in scope. We believe that with LL&E's substantial US
and internationalacreage, Burlington will be in a position to
significantly grow its natural gas and oil reserves through both
exploration and acquisition. In our view, the company will benefit
from the focus of its new management team and the addition of the
well-regarded LL&E technical staff.
<PAGE>
Real estate investment trusts (REITs) also continue to be a large
sector investment for the Fund at 14.6% of net assets. In our last
report to shareholders, we discussed the long-term secular
opportunity for REITs as institutional holders of specific real
estate assets transition their ownership to the public sector. Since
the beginning of 1997, our largest investment in the sector, Equity
Residential Properties Trust (EQR), the largest multifamily REIT,
announced a total of $2.7 billion in residential property
acquisitions. These transactions range from purchases of individual
units from local owners to the purchase of entire institutional
portfolios. These purchases effectively increased the company's
managed portfolio of properties by 70%. Perhaps the most significant
of these transactions in terms of its longer-term implications was
that of the pension fund that swapped all of its multifamily assets
for EQR shares, making EQR its singular investment in the apartment
sector.
EQR will remain a strong force for consolidation in the multifamily
arena, where its economies of scale, wide geographic scope, and
portfolio diversification are unmatched. We believe that EQR will be
the partner of choice for institutional holders of multifamily
dwellings who want to securitize their real estate holdings, such as
other pension funds and insurance companies.
In Conclusion
At the end of the July quarter, cash equivalents accounted for 21.5%
of net assets, down slightly from 23.5% at the end of the prior
quarter. We continue to take a careful, "bottom-up" approach to
selecting new investments and adding to existing portfolio holdings.
We thank you for your investment in Merrill Lynch Growth Fund, and
we look forward to reviewing our outlook and strategy with you in
our upcoming annual report to shareholders.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen C. Johnes)
Stephen C. Johnes
Vice President and
Portfolio Manager
August 26, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
<PAGE>
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +24.92% +18.36%
Five Years Ended 6/30/97 +25.94 +24.59
Inception (11/28/88)
through 6/30/97 +20.27 +19.52
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +23.69% +19.69%
Five Years Ended 6/30/97 +24.65 +24.65
Ten Years Ended 6/30/97 +15.91 +15.91
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/97 +23.65% +22.65%
Inception (10/21/94)
through 6/30/97 +24.88 +24.88
[FN]
*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 6/30/97 +24.63% +18.09%
Inception (10/21/94)
through 6/30/97 +25.86 +23.36
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid++ % Change*
<S> <C> <C> <C> <C> <C>
11/28/88--12/31/88 $ 9.61 $ 9.44 $0.257 $0.090 + 1.88%
1989 9.44 12.33 -- 0.211 +32.96
1990 12.33 12.20 0.130 -- + 0.03
1991 12.20 13.95 1.182 0.012 +25.20
1992 13.95 14.88 0.449 -- + 9.97
1993 14.88 17.48 2.122 -- +32.37
1994 17.48 17.49 0.295 -- + 1.77
1995 17.49 21.80 1.723 0.359 +36.82
1996 21.80 26.13 1.394 0.708 +29.72
1/1/97--7/31/97 26.13 30.59 -- 0.273 +18.17
------ ------
Total $7.552 Total $1.653
Cumulative total return as of 7/31/97: +427.04%*
<PAGE>
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid++ % Change*
<S> <C> <C> <C> <C> <C>
3/27/87--12/31/87 $10.00 $ 8.49 $0.060 $0.187 -12.72%
1988 8.49 9.45 0.257 0.140 +16.04
1989 9.45 12.35 -- 0.084 +31.62
1990 12.35 12.09 0.130 -- - 1.02
1991 12.09 13.65 1.182 0.012 +23.85
1992 13.65 14.39 0.449 -- + 8.79
1993 14.39 16.65 2.122 -- +31.11
1994 16.65 16.47 0.295 -- + 0.72
1995 16.47 20.40 1.723 0.143 +35.45
1996 20.40 24.28 1.394 0.485 +28.38
1/1/97--7/31/97 24.28 28.36 -- 0.152 +17.46
------ ------
Total $7.612 Total $1.203
Cumulative total return as of 7/31/97: +379.57%*
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not reflect deduction of any sales charge; results would
be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid++ % Change*
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $17.45 $16.47 $0.295 -- - 3.90%
1995 16.47 20.30 1.723 $0.239 +35.44
1996 20.30 24.13 1.394 0.498 +28.34
1/1/97--7/31/97 24.13 28.18 -- 0.162 +17.49
------ ------
Total $3.412 Total $0.899
Cumulative total return as of 7/31/97: +96.26%*
<PAGE>
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not reflect deduction of any sales charge; results would
be lower if sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid++ % Change*
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $18.47 $17.47 $0.295 -- - 3.79%
1995 17.47 21.76 1.723 $0.321 +36.52
1996 21.76 26.07 1.394 0.650 +29.39
1/1/97--7/31/97 26.07 30.51 -- 0.242 +18.01
------ ------
Total $3.412 Total $1.213
Cumulative total return as of 7/31/97: +100.56%*
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/97 4/30/97 7/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Growth Fund Class A Shares* $30.59 $26.13 $23.06 +39.84%(1) +17.07%
ML Growth Fund Class B Shares* 28.36 24.20 21.53 +39.40(1) +17.19
ML Growth Fund Class C Shares* 28.18 24.05 21.42 +39.27(1) +17.17
ML Growth Fund Class D Shares* 30.51 26.05 23.00 +39.85(1) +17.12
Standard & Poor's 500 Index** 954.29 801.34 639.95 +49.12 +19.09
ML Growth Fund Class A Shares--Total Return* +44.20(2) +18.17(3)
ML Growth Fund Class B Shares--Total Return* +42.76(4) +17.85(5)
ML Growth Fund Class C Shares--Total Return* +42.72(6) +17.88(7)
ML Growth Fund Class D Shares--Total Return* +43.91(8) +18.10(9)
Standard & Poor's 500 Index--Total Return** +52.02 +19.58
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**An unmanaged broad-based index comprised of common stocks. Total
investment returns for unmanaged indexes are based on estimates.
(1)Percent change includes reinvestment of $1.394 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.858 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.273 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.616 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.152 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.630 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.162 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.795 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.242 per share ordinary
income dividends.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Held/ Percent of
Industries Face Amount Long-Term Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Banking & Financial 1,000,000 Republic New York Corp. $ 44,267,281 $ 115,500,000 1.5%
Services 2,000,000 Safra Republic Holdings S.A. (ADR)* 69,529,500 232,000,000 3.1
-------------- -------------- ------
113,796,781 347,500,000 4.6
Diversified Resource 2,500,000 Freeport-McMoRan Copper & Gold, Inc.
Companies (Class A) 65,809,748 68,125,000 0.9
5,000,000 Freeport-McMoRan Copper & Gold, Inc.
(Class B) 107,984,584 146,250,000 2.0
3,750,000 Freeport-McMoRan, Inc. 114,789,644 115,546,875 1.5
7,000,000 IMC Global, Inc. 238,165,862 220,937,500 3.0
-------------- -------------- ------
526,749,838 550,859,375 7.4
<PAGE>
Domestic 2,650,000 Burlington Resources, Inc. 124,170,230 125,212,500 1.7
Exploration & 1,038,469 Monterey Resources, Inc. 10,380,408 15,836,653 0.2
Production 4,669,900 Santa Fe Energy Resources, Inc. 24,977,167 40,277,888 0.5
3,500,000 Vastar Resources, Inc. 106,578,685 126,000,000 1.7
-------------- -------------- ------
266,106,490 307,327,041 4.1
Electronic 324,800 Cirrus Logic, Inc. 6,227,236 4,405,100 0.0
Components $133,500,000 Cirrus Logic, Inc. (Convertible
Bond), 6% due 12/15/2003 123,411,250 109,136,250 1.5
3,500,000 Komag, Inc. 72,539,664 72,843,750 1.0
-------------- -------------- ------
202,178,150 186,385,100 2.5
Energy Acquisition 8,000,000 Apache Corp. 232,123,043 282,000,000 3.8
& Exploitation 2,200,000 Devon Energy Corp. 34,401,130 83,737,500 1.1
$ 1,000,000 Devon Financing Trust (Convertible
Preferred), 6.50% due 6/15/2026 50,000,000 73,125,000 1.0
4,000,000 Newfield Exploration Co. 56,598,373 96,000,000 1.3
-------------- -------------- ------
373,122,546 534,862,500 7.2
International 8,000,000 Norcen Energy Resources, Ltd. 120,353,892 191,041,320 2.6
Exploration &
Production
Miscellaneous 1,000,000 Affymetrix, Inc. 16,662,627 32,375,000 0.4
2,464,260 CytoTherapeutics, Inc. 17,442,583 12,321,300 0.2
434,500 CytoTherapeutics, Inc. (Warrants)(a) 651,750 26,505 0.0
934,000 Genset (ADR)* 15,681,212 23,350,000 0.3
1,000,000 RAO Gazprom (ADR)* 17,865,451 17,150,000 0.2
-------------- -------------- ------
68,303,623 85,222,805 1.1
Natural Gas 3,855,434 TransMontaigne Oil Co. 27,060,669 70,361,671 0.9
Gathering & 3,500,000 Western Gas Resources, Inc. 74,549,278 66,500,000 0.9
Transmission -------------- -------------- ------
101,609,947 136,861,671 1.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Long-Term Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Offshore Drilling 9,200,000 Ensco International, Inc. $ 194,651,450 $ 608,350,000 8.1%
Companies 16,300,000 Global Marine, Inc. 59,126,323 466,587,500 6.3
853,800 Santa Fe International Corporation 26,302,370 35,219,250 0.5
-------------- -------------- ------
280,080,143 1,110,156,750 14.9
<PAGE>
Oilfield Services 7,000,000 Nabors Industries, Inc. 90,192,970 218,750,000 2.9
5,000,000 Schlumberger Ltd. 223,527,267 381,875,000 5.1
4,000,000 Tidewater, Inc. 156,771,516 202,000,000 2.7
4,600,000 Weatherford Enterra, Inc. 135,307,975 200,100,000 2.7
3,500,000 Western Atlas, Inc. 204,011,284 278,468,750 3.8
-------------- -------------- ------
809,811,012 1,281,193,750 17.2
Personal 1,000,000 Dell Computer Corp. 6,211,734 85,500,000 1.1
Computers
Real Estate 932,700 Starwood Lodging Trust 31,986,217 43,487,137 0.6
Investment
Trusts--Hotel
Real Estate 5,400,000 Beacon Properties Corp. 178,620,085 197,775,000 2.6
Investment 343,700 Crescent Operating, Inc. 5,155,500 5,327,350 0.1
Trusts--Office 4,920,000 Crescent Real Estate Equities, Inc. 124,669,501 153,750,000 2.1
1,483,800 Equity Office Properties Trust 37,440,404 43,030,200 0.6
-------------- -------------- ------
345,885,490 399,882,550 5.4
Real Estate 2,000,000 Avalon Properties, Inc. 52,951,219 55,250,000 0.7
Investment 5,000,000 Equity Residential Properties Trust 216,535,276 252,187,500 3.4
Trusts--Residential -------------- -------------- ------
269,486,495 307,437,500 4.1
Real Estate 3,442,000 Federal Realty Investment Trust 95,449,307 91,213,000 1.2
Investment 6,500,000 Simon DeBartolo Group, Inc. 194,655,279 208,000,000 2.8
Trusts--Retail 888,500 Weingarten Realty Investors 38,164,189 38,760,812 0.5
-------------- -------------- ------
328,268,775 337,973,812 4.5
<CAPTION>
Total Long-Term Investments 3,843,951,133 5,905,691,311 79.1
Face
Amount Short-Term Investments
Commercial $50,000,000 Associates First Capital Corp.,
Paper** 5.52% due 9/05/1997 49,731,667 49,731,667 0.6
27,567,000 Atlantic Asset Securitization Corp.,
5.53% due 8/18/1997 27,495,012 27,495,012 0.4
23,400,000 CSW Credit, Inc., 5.57% due 8/08/1997 23,374,657 23,374,657 0.3
CXC Inc.:
50,000,000 5.57% due 8/07/1997 49,953,583 49,953,583 0.7
40,000,000 5.52% due 8/29/1997 39,828,267 39,828,267 0.5
Clipper Receivables Corp.:
17,839,000 5.53% due 8/14/1997 17,803,377 17,803,377 0.2
50,000,000 5.52% due 8/22/1997 49,839,000 49,839,000 0.7
55,537,000 5.50% due 9/04/1997 55,248,516 55,248,516 0.7
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Percent of
Amount Short-Term Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Commercial $50,000,000 Corporate Receivables Corp., 5.53%
Paper** due 9/03/1997 $ 49,746,542 $ 49,746,542 0.6%
(concluded) Countrywide Home Loans, Inc.:
45,000,000 5.51% due 9/11/1997 44,717,612 44,717,612 0.6
50,000,000 5.52% due 9/19/1997 49,624,333 49,624,333 0.6
20,146,000 Delaware Funding Corp., 5.56% due
8/15/1997 20,102,440 20,102,440 0.3
Falcon Asset Securitization Corp.:
50,000,000 5.51% due 8/26/1997 49,808,681 49,808,681 0.7
45,000,000 5.57% due 8/29/1997 44,805,050 44,805,050 0.6
Finova Capital Corp.:
32,000,000 5.58% due 8/21/1997 31,900,800 31,900,800 0.4
20,000,000 5.54% due 9/15/1997 19,861,500 19,861,500 0.2
43,000,000 GTE Corp., 5.51% due 8/04/1997 42,980,256 42,980,256 0.6
46,660,000 General Motors Acceptance Corp.,
5.81% due 8/01/1997 46,660,000 46,660,000 0.6
50,000,000 Goldman Sachs Group, L.P., 5.56% due
8/18/1997 49,868,722 49,868,722 0.7
International Securitization Corp.:
50,000,000 5.52% due 8/14/1997 49,900,333 49,900,333 0.7
45,000,000 5.52% due 8/28/1997 44,813,700 44,813,700 0.6
55,000,000 5.52% due 9/18/1997 54,595,200 54,595,200 0.7
50,000,000 Lehman Brothers Holdings Inc., 5.63%
due 8/05/1997 49,968,722 49,968,722 0.7
Lexington Parker Capital Corp.:
8,366,000 5.55% due 8/07/1997 8,358,261 8,358,261 0.1
19,000,000 5.58% due 8/08/1997 18,979,385 18,979,385 0.2
40,000,000 5.58% due 8/18/1997 39,894,600 39,894,600 0.5
50,000,000 Lucent Technologies, Inc., 5.50% due
8/04/1997 49,977,083 49,977,083 0.7
20,000,000 Monsanto Co., 5.60% due 8/01/1997 20,000,000 20,000,000 0.3
Morgan Stanley Group, Inc.:
50,000,000 5.58% due 8/08/1997 49,945,750 49,945,750 0.7
50,000,000 5.50% due 8/28/1997 49,793,750 49,793,750 0.7
NYNEX Corp.:
34,600,000 5.52% due 8/04/1997 34,584,084 34,584,084 0.5
50,000,000 5.50% due 8/25/1997 49,816,667 49,816,667 0.7
50,000,000 National Fleet Funding Corp., 5.53%
due 9/10/1997 49,692,778 49,692,778 0.7
Preferred Receivables Funding Corp.:
50,000,000 5.57% due 8/07/1997 49,953,583 49,953,583 0.7
50,450,000 5.56% due 8/15/1997 50,340,916 50,340,916 0.7
50,000,000 WCP Funding, Inc., 5.57% due 8/07/1997 49,953,583 49,953,583 0.7
-------------- -------------- ------
1,483,918,410 1,483,918,410 19.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Percent of
Industries Amount Short-Term Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
US Government Federal Home Loan Mortgage Corp.:
Agency $30,040,000 5.39% due 8/05/1997 $ 30,022,010 $ 30,022,010 0.4%
Obligations** 50,000,000 5.39% due 8/18/1997 49,872,736 49,872,736 0.7
40,000,000 Federal National Mortgage Association,
5.44% due 8/05/1997 39,975,822 39,975,822 0.5
-------------- -------------- ------
119,870,568 119,870,568 1.6
Total Short-Term Investments 1,603,788,978 1,603,788,978 21.5
Total Investments $5,447,740,111 7,509,480,289 100.6
==============
Liabilities in Excess of Other Assets (45,794,560) (0.6)
-------------- ------
Net Assets $7,463,685,729 100.0%
============== ======
Net Asset Class A--Based on net assets of $1,535,770,627
Value: and 50,203,620 shares of beneficial
interest outstanding $ 30.59
==============
Class B--Based on net assets of $4,153,746,696
and 146,464,076shares of beneficial
interest outstanding $ 28.36
==============
Class C--Based on net assets of $346,238,488
and 12,287,372 shares of beneficial
interest outstanding $ 28.18
==============
Class D--Based on net assets of $1,427,929,918
and 46,808,388 shares of beneficial
interest outstanding $ 30.51
==============
<PAGE>
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and number of sharesare
subject to adjustment under certain conditions until the expiration
date.
</TABLE>
PORTFOLIO INFORMATION
For the Quarter Ended July 31, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Ensco International, Inc. 8.1%
Global Marine, Inc. 6.3
Schlumberger Ltd. 5.1
Apache Corp. 3.8
Western Atlas, Inc. 3.8
Equity Residential Properties Trust 3.4
Safra Republic Holdings S.A. (ADR) 3.1
IMC Global, Inc. 3.0
Nabors Industries, Inc. 2.9
Freeport-McMoRan Copper & Gold, Inc.++ 2.9
[FN]
++Includes Class A and Class B Shares.
Additions
Burlington Resources, Inc.
**Crescent Operating, Inc.
Equity Office Property Trust
**Monterey Resources, Inc.
*Rambus, Inc.
Santa Fe International Corp.
Deletions
Intel Corp.
Potash Corp. of Saskatchewan Inc.
*Rambus, Inc.
Sony Corp.
Sony Corp. (ADR)
<PAGE>
[FN]
*Added and deleted in the same quarter.
**The Fund's positions in Crescent Operating, Inc. and Monterey
Resources, Inc. were established through spin-offs of Fund holdings
Crescent Real Estate Equities, Inc. and Santa Fe Energy Resources,
Inc., respectively.
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Stephen C. Johnes, Vice President and
Portfolio Manager
Arthur Moretti, Vice President
Gerald M. Richard, Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
