MERRILL LYNCH
ASSET GROWTH
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Quarterly Report
May 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.
Merrill Lynch Asset
Growth Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #18241 -- 5/97
[RECYCLE LOGO OMITTED]
Printed on post-consumer recycled paper
MERRILL LYNCH ASSET GROWTH FUND, INC.
Worldwide Breakdown of
Investments as of Stocks & Fixed-Income Percent of
May 31, 1997 Securities by Country Net Assets+
United States* 31.0%
Japan 13.6
Germany 7.1
United Kingdom 6.3
Canada 4.7
Sweden 4.0
Spain 3.8
Italy 3.8
Mexico 3.3
France 3.1
Switzerland 3.1
Brazil 2.6
Finland 2.5
South Africa 2.1
Hong Kong 2.0
Australia 1.7
Denmark 1.4
Argentina 1.2
Indonesia 1.2
Philippines 1.1
Netherlands 0.7
Norway 0.4
South Korea 0.1
-------
Total 100.8%
=======
* Includes investments in short-term
investments.
+ Percent of net assets may not
total 100%.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 6.1%
Pharmaceuticals 4.6
Beverages 4.0
Banking 3.9
Insurance 3.6
Electrical Equipment 3.4
Mining 3.3
Electronics 2.9
Petroleum 2.9
Diversified 2.8
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
Tokio Marine & Fire
Insurance Co., Ltd. Japan 1.4%
Eisai Co., Ltd. Japan 1.3
BBC Brown Boveri &
Cie (Bearer) Switzerland 1.3
Canadian Pacific, Ltd. Canada 1.2
Yacimientos Petroliferos
Fiscales S.A. (ADR) Argentina 1.2
Imperial Chemical
Industries PLC
(Ordinary) UK 1.2
Telefonos de Mexico,
S.A. de C.V. (ADR) Mexico 1.2
Mannesmann AG Germany 1.2
Mitsubishi Heavy
Industries, Ltd. Japan 1.2
Broken Hill
Proprietary Co., Ltd. Australia 1.2
Merrill Lynch Asset Growth Fund, Inc., May 31, 1997
DEAR SHAREHOLDER
Stock and bond market turbulence increased during the three-month period
ended May 31, 1997. Mounting evidence of stronger-than-expected economic
growth suggested to investors that the Federal Reserve Board (FRB) would
make a preemptive strike to contain inflationary pressures. These
concerns were heightened by statements made by FRB Chairman Alan
Greenspan, and culminated in an increase in the Federal Funds rate of
0.25% to 5.50% on March 25. As investors became concerned that this
might prove to be only the first in a series of monetary policy
tightening moves, interest rates rose and stock and bond
prices declined.
Following the FRB's action, investor sentiment fluctuated from negative
to more positive, depending upon whether the latest economic data
releases were perceived to suggest an overheating or moderating trend.
Stock prices were given a boost following a series of strong corporate
earnings reports and the likelihood that a capital gains tax cut would
be part of the Federal balanced budget agreement. Nonetheless, clear-cut
signs of continued low inflation and moderate economic growth, as well
as no further indications of monetary policy tightening, are probably
needed to bring stability to the financial markets. Another potential
positive for the US financial markets would be a successful conclusion
to the Federal budget agreement currently under discussion by Congress
and the Clinton Administration.
On the international front, the US dollar weakened relative to the yen
and the Deutschemark, although it gradually recovered during May.
Uncertainty over the progress of the European Monetary Union helped
stabilize the US dollar relative to the Deutschemark and other European
currencies.
Portfolio Matters
As of May 31, 1997, the Fund's asset allocation was: foreign stocks, 55%
of net assets; US stocks, 24%; foreign bonds, 15%; US bonds, 3%; and
cash and cash equivalents, 3%.
During the three months ended May 31, 1997, the primary change in the
portfolio was the shift of assets from US stocks into foreign stocks.
This change reflected our belief that the relative performance of
equities in markets outside the United States was likely to improve
relative to the US stock market, which has been a leader among global
equity markets for an extended period of time. In the foreign equity
sector, we added to existing commitments while initiating several new
positions. New positions included Broken Hill Proprietary Co. Ltd. in
Australia, Uniao de Bancos Brasileiros S.A. in Brazil, Amer Group Ltd.
in Finland, and Sasol Ltd. in South Africa. The expansion of foreign
equity representation did not materially change the relative country
weightings. The size of the equity commitments in Japan and Europe
remained below the benchmark unmanaged Morgan Stanley Europe, Australia,
Far East Index. We maintained significant positions in Canada and Latin
American markets. At the same time, our commitment to the emerging
markets of Asia remained limited.
Our increasingly cautious view of the US equity market reflected our
concern that a slower US economy in coming quarters could lead to
earnings disappointments. The largest concentrations of assets remain in
the financial services, technology, energy and healthcare sectors. We
believe earnings of companies in these sectors are likely to hold up
well even if the US economy slows down in coming quarters. New positions
in these sectors included: Intel Corp. and Microsoft Corp. in
technology; Chase Manhattan Corporation, Nationwide Financial Services,
Inc. and Hartford Life, Inc. in financial services; Smith International,
Inc. in energy; and Oxford Health Plans, Inc. in healthcare.
In the US bond market, we reduced exposure to interest rate risk just
prior to the Federal Open Market Committee meeting on March 25, 1997.
However, during April we restored the duration of US bonds and cash
reserves earmarked to US bonds to the five-year level, a neutral
position relative to the benchmark unmanaged Salomon World Government
Bond Index. Indications of subdued wage inflation led us to take a more
positive view of US bonds, while an expected slowdown in the US economy
improves the risk/reward relationship for US fixed-income securities.
We restored our position in Canadian bonds as a means of obtaining
indirect exposure to US interest rates. We also established a new
commitment in Australian bonds. We expect the yield differential between
Australia and the United States to narrow, given evidence of benign
inflationary pressure in Australia and continued modest economic growth.
Our remaining foreign bond exposure remains concentrated in Europe.
However, we liquidated our position in French bonds early in May in
response to uncertainties surrounding the elections which were held late
in the month and in early June. Remaining commitments included
obligations in the core markets of Germany and Denmark and the
peripheral markets of Italy, Sweden and Spain. We maintain currency
forward contracts against our European bond positions as well as the
equity positions, with the exception of the United Kingdom. Expectations
of renewed weakness in the Australian and Canadian dollars led us to
hedge our holdings in these currencies back to the US dollar.
In Conclusion
We thank you for your investment in Merrill Lynch Asset Growth Fund,
Inc., and we look forward to reviewing our outlook and strategy with you
in our upcoming annual report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/THOMAS R. ROBINSON
Thomas R. Robinson
Vice President and
Senior Portfolio Manager
/S/JOEL HEYMSFELD
Joel Heymsfeld
Portfolio Manager
June 25, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
[bullet] Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year,
decreasing 1% each year thereafter to 0% after the fourth year.
In addition, Class B Shares are subject to a distribution fee
of 0.75% and an account maintenance fee of 0.25%. These shares
automatically convert to Class D Shares after approximately 8
years. (There is no initial sales charge for automatic share
conversions.)
[bullet] Class C Shares are subject to a distribution fee of 0.75% and
an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge if
redeemed within one year of purchase.
[bullet] Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a 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 3/31/97 +11.25% +5.41%
Inception (9/02/94)
through 3/31/97 + 5.78 +3.59
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +10.10% +6.10%
Inception (9/02/94)
through 3/31/97 + 4.72 +4.00
* Maximum contingent deferred sales charge is 4% and is
reduced to 0% after 4 years.
** Assuming payment of applicable contingent deferred
sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/97 +10.15% +9.15%
Inception (10/21/94)
through 3/31/97 + 5.62 +5.62
* 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 3/31/97 +10.98% +5.15%
Inception (10/21/94)
through 3/31/97 + 6.47 +4.15
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Recent
Performance
Results*
12 Month 3 Month
5/31/97 2/28/97 5/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $11.90 $11.34 $10.36 +14.86% +4.94%
Class B Shares 11.85 11.32 10.34 +14.60 +4.68
Class C Shares 11.79 11.26 10.30 +14.47 +4.71
Class D Shares 11.91 11.36 10.34 +15.18 +4.84
Class A Shares - Total Return +16.60(1) +4.94
Class B Shares - Total Return +15.45(2) +4.68
Class C Shares - Total Return +15.42(3) +4.71
Class D Shares - Total Return +16.31(4) +4.84
* Investment results shown do not reflect sales charges; results shown would be
lower if a sales charge was included.
(1) Percent change includes reinvestment of $0.163 per share ordinary income dividends.
(2) Percent change includes reinvestment of $0.080 per share ordinary income dividends.
(3) Percent change includes reinvestment of $0.090 per share ordinary income dividends.
(4) Percent change includes reinvestment of $0.106 per share ordinary income dividends.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary --
Class A Shares
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/02/94 -- 12/31/94 $10.00 $9.33 -- $0.038 - 6.31%
1995 9.33 9.80 -- 0.226 + 7.49
1996 9.80 10.97 -- 0.163 +13.63
1/1/97 -- 5/31/97 10.97 11.90 -- -- + 8.48
Total $0.427
Cumulative total return as of 5/31/97: +24.13%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary --
Class B Shares
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
9/02/94 -- 12/31/94 $10.00 $9.33 -- $0.009 - 6.61%
1995 9.33 9.83 -- 0.096 + 6.40
1996 9.83 10.97 -- 0.080 +12.42
1/1/97 -- 5/31/97 10.97 11.85 -- -- + 8.02
Total $0.185
Cumulative total return as of 5/31/97: +20.67%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary --
Class C Shares
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $9.85 $9.32 -- $0.023 - 5.14%
1995 9.32 9.79 -- 0.120 + 6.34
1996 9.79 10.92 -- 0.090 +12.48
1/1/97 -- 5/31/97 10.92 11.79 -- -- + 7.97
Total $0.233
Cumulative total return as of 5/31/97: +22.50%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge
was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary --
Class D Shares
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $9.86 $9.33 -- $0.036 - 5.01%
1995 9.33 9.80 -- 0.207 + 7.28
1996 9.80 11.00 -- 0.106 +13.35
1/1/97 -- 5/31/97 11.00 11.91 -- -- + 8.27
Total $0.349
Cumulative total return as of 5/31/97: +25.05%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (In US dollars)
Shares Percent of
COUNTRY Industries Held Common Stocks Cost Value Net Assets
<S> <C> <C> <C> <C> <C> <C>
Argentina Petroleum 4,500 Yacimientos Petroliferos Fiscales S.A. (ADR)(a) $106,570 $135,000 1.2%
----------- ----------- -------
Total Common Stocks in Argentina 106,570 135,000 1.2
=========== =========== =======
Australia Diversified 9,000 Broken Hill Proprietary Co., Ltd. 118,416 129,209 1.2
----------- ----------- -------
Total Common Stocks in Australia 118,416 129,209 1.2
=========== =========== =======
Brazil Banking 1,700 Uniao de Bancos Brasileiros S.A. (GDR)(b) 57,375 58,650 0.5
Beverages 150,000 Companhia Cervejaria Brahma S.A. PN (Preferred) 87,058 108,793 1.0
Telecommunications 900 Telecomunicacoes Brasileiras S.A.-Telebras
(ADR)(a) 54,967 123,638 1.1
----------- ----------- -------
Total Common Stocks in Brazil 199,400 291,081 2.6
=========== =========== =======
Canada Automobile Parts 2,400 Magna International, Inc. 114,741 129,000 1.2
Entertainment 2,800 Imax Corporation 45,392 60,200 0.5
Mining 1,500 Potash Corp. of Saskatchewan, Inc. 110,576 123,188 1.1
Multi-Industry 5,100 Canadian Pacific, Ltd. 109,210 135,150 1.2
----------- ----------- -------
Total Common Stocks in Canada 379,919 447,538 4.0
=========== =========== =======
Finland Diversified 2,700 Amer Group Ltd. 49,189 53,098 0.5
Paper & Forest
Products 5,000 UPM-Kymmene OY 105,987 114,783 1.0
Pharmaceuticals 1,000 Orion-yhtymae OY (Class A) 39,225 39,507 0.4
Transportation 2,600 Finnlines OY 48,128 72,394 0.6
----------- ----------- -------
Total Common Stocks in Finland 242,529 279,782 2.5
=========== =========== =======
France Iron & Steel 6,100 Usinor-Sacilor S.A. 99,172 91,562 0.8
Reinsurance 3,100 Scor S.A. 118,452 125,195 1.1
Semiconductor Capital 1,500 SGS-Thomson Microelectronics N.V.
Equipment (NY Registered Shares) 70,718 125,250 1.2
----------- ----------- -------
Total Common Stocks in France 288,342 342,007 3.1
=========== =========== =======
Germany Chemicals 200 Henkel KGaA 8,891 10,468 0.1
1,600 Henkel KGaA (Preferred) 68,038 90,304 0.8
----------- ----------- -------
76,929 100,772 0.9
Electrical Equipment 1,900 Siemens AG 86,269 107,159 1.0
Machinery & Equipment 320 Mannesmann AG 103,899 130,023 1.2
----------- ----------- -------
Total Common Stocks in Germany 267,097 337,954 3.1
=========== =========== =======
Hong Kong Banking 3,200 HSBC Holdings PLC 51,510 97,057 0.9
Telecommunications 5,500 Hong Kong Telecommunications Ltd. (ADR)(a) 92,580 124,438 1.1
----------- ----------- -------
Total Common Stocks in Hong Kong 144,090 221,495 2.0
=========== =========== =======
Indonesia Telecommunications 4,290 P.T. Indonesian Satellite Corp. (ADR)(a) 144,283 128,164 1.2
----------- ----------- -------
Total Common Stocks in Indonesia 144,283 128,164 1.2
=========== =========== =======
Italy Machinery 23,000 Danieli & C. Officine Meccaniche S.p.A. 67,768 81,760 0.7
Publishing 7,000 Mondadori (Arnoldo) Editore S.p.A. 59,094 40,921 0.4
----------- ----------- -------
Total Common Stocks in Italy 126,862 122,681 1.1
=========== =========== =======
Japan Automobile Parts 1,000 Autobacs Seven Co., Ltd. 58,806 73,074 0.7
Building &
Construction 10,000 Maeda Corp. 102,085 55,450 0.5
12,000 Okumura Corp. 96,740 63,033 0.6
----------- ----------- -------
198,825 118,483 1.1
Capital Goods 18,000 Mitsubishi Heavy Industries, Ltd. 132,433 129,677 1.2
Consumer --
Electronics 6,000 Matsushita Electric Industrial Co., Ltd. 97,202 112,964 1.0
Electrical Equipment 22,000 Mitsubishi Electric Co. 138,107 124,828 1.1
Electronics 1,000 Rohm Co., Ltd. 42,944 104,023 0.9
1,000 Sony Corporation 72,316 84,336 0.8
900 Sony Corporation (ADR)(a) 65,916 76,725 0.7
----------- ----------- -------
181,176 265,084 2.4
Insurance 13,000 Tokio Marine & Fire Insurance Co., Ltd. 143,384 153,112 1.4
Pharmaceuticals 7,000 Eisai Co., Ltd. 122,676 140,818 1.3
Photography 4,000 Canon, Inc. 75,063 101,444 0.9
Textiles 16,000 Toray Industries, Inc. 98,636 108,941 1.0
Tires & Rubber 5,000 Bridgestone Corporation 86,184 113,050 1.0
Warehouse & Storage 9,000 Mitsui-Soko Co., Ltd. 73,996 61,047 0.5
----------- ----------- -------
Total Common Stocks in Japan 1,406,488 1,502,522 13.6
Mexico Beverages 4,200 Panamerican Beverages, Inc. (Class A) 97,532 121,800 1.1
Multi-Industry 10,200 Grupo Carso, S.A. de C.V. (ADR)(a) 145,170 113,475 1.0
Telecommunications 3,000 Telefonos de Mexico, S.A. de C.V. (ADR)(a) 117,062 133,125 1.2
----------- ----------- -------
Total Common Stocks in Mexico 359,764 368,400 3.3
Netherlands Banking 4,400 ABN AMRO Holding N.V. 61,651 81,278 0.7
----------- ----------- -------
Total Common Stocks in the Netherlands 61,651 81,278 0.7
Norway Cruise Lines 10,000 Color Line ASA 37,601 44,242 0.4
----------- ----------- -------
Total Common Stocks in Norway 37,601 44,242 0.4
Philippines Beverages 40,920 San Miguel Corp. (Class B) 122,824 123,459 1.1
----------- ----------- -------
Total Common Stocks in the Philippines 122,824 123,459 1.1
South Diversified 10,000 Sasol Ltd. 116,199 122,565 1.1
Africa Mining 3,100 De Beers Consolidated Mines Ltd. (ADR)(a) 106,903 108,888 1.0
----------- ----------- -------
Total Common Stocks in South Africa 223,102 231,453 2.1
South Engineering &
Korea Construction 3,554 Hyundai Engineering & Construction
Co., Ltd. (GDR)(b) 45,605 13,344 0.1
----------- ----------- -------
Total Common Stocks in South Korea 45,605 13,344 0.1
Spain Petroleum 2,900 Repsol S.A. (ADR)(a) 100,274 122,163 1.1
----------- ----------- -------
Total Common Stocks in Spain 100,274 122,163 1.1
Sweden Banking 3,200 Sparbanken Sverige AB (Class A) 40,252 62,969 0.6
Investment Management 4,500 Bure Investment AB 37,938 55,927 0.5
Real Estate Investment 2,600 Castellum AB 17,442 18,176 0.1
Trusts ----------- ----------- -------
Total Common Stocks in Sweden 95,632 137,072 1.2
Switzerland Chemicals 110 Ciba Specialty Chemicals AG (ADR)(a) 4,138 5,210 0.0
Electrical Equipment 100 BBC Brown Boveri & Cie (Bearer) 104,679 137,195 1.3
Pharmaceuticals 1,100 Novartis AG (ADR)(a) 47,575 75,075 0.7
14 Roche Holding AG 117,104 124,422 1.1
----------- ----------- -------
164,679 199,497 1.8
----------- ----------- -------
Total Common Stocks in Switzerland 273,496 341,902 3.1
=========== =========== =======
United Beverages 9,500 Grand Metropolitan PLC 64,774 88,257 0.8
Kingdom Chemicals 10,100 Imperial Chemical Industries PLC (Ordinary) 126,188 134,139 1.2
Merchandising 10,400 Boots Company PLC 105,894 120,433 1.1
Mining 7,500 RTZ Corporation PLC (Registered) 114,244 128,804 1.2
Steel 52,000 British Steel PLC 131,287 128,853 1.2
Telecommunications 21,000 Vodafone Group PLC 73,076 93,425 0.8
----------- ----------- -------
Total Common Stocks in the United Kingdom 615,463 693,911 6.3
United Aerospace & Defense 550 AlliedSignal, Inc. 41,038 42,213 0.4
States 600 United Technologies Corp. 26,530 48,225 0.4
----------- ----------- -------
67,568 90,438 0.8
Appliances 400 Sunbeam-Oster Co. 13,456 13,500 0.1
Automobile Rental
& Leasing 800 Hertz Corp. (Class A) 23,247 27,400 0.3
Banking 1,400 Bank of New York Company, Inc. (The) 29,967 59,675 0.5
300 BankAmerica Corp. 30,788 35,063 0.3
400 Chase Manhattan Corporation 41,082 37,800 0.4
----------- ----------- -------
101,837 132,538 1.2
Broadcasting -- Cable 500 Tele-Communications, Inc. (Class A) 7,189 7,563 0.1
Chemicals 500 duPont (E.I.) de Nemours & Co. 54,569 54,438 0.5
Computer Services
& Software 1,600 Cabletron Systems, Inc. 55,132 70,400 0.6
1,000 Computer Associates International, Inc. 41,029 54,750 0.5
1,680 First Data Corp. 59,457 67,200 0.6
500 International Business Machines Corp. 27,474 43,250 0.4
100 Microsoft Corp. 10,250 12,400 0.1
712 Oracle Corp. 23,818 33,197 0.3
----------- ----------- -------
217,160 281,197 2.5
Computers 600 COMPAQ Computer Corp. 44,573 64,950 0.6
Consumer Products 1,000 Black & Decker Corporation 33,358 34,750 0.3
Containers 1,500 Owens-Illinois, Inc. 43,022 46,313 0.4
Electronics 400 Intel Corp. 54,741 60,550 0.5
Fertilizers 800 IMC Global, Inc. 30,628 31,300 0.3
Financial Services 800 American Express Company 38,967 55,600 0.5
1,100 First USA, Inc. 56,036 54,450 0.5
760 MGIC Investment Corp. 58,551 67,640 0.6
----------- ----------- -------
153,554 177,690 1.6
Healthcare --
Managed Care 900 Oxford Health Plans, Inc. 56,624 63,225 0.6
Hospital Supplies 900 Abbott Laboratories 28,404 56,700 0.5
Insurance 600 Aetna Inc. 46,727 60,600 0.6
800 Allstate Corp. 32,746 58,900 0.5
400 Hartford Life, Inc. (Class A) 12,983 13,400 0.1
500 Nationwide Financial Services, Inc. 11,750 14,062 0.1
1,000 Travelers Group, Inc. 53,925 54,875 0.5
500 UNUM Corporation 31,736 39,562 0.4
----------- ----------- -------
189,867 241,399 2.2
Leisure/Tourism 2,100 Brunswick Corporation 52,568 64,050 0.6
514 TCI Pacific Communications
(Convertible Preferred) 45,616 51,528 0.5
----------- ----------- -------
98,184 115,578 1.1
Machinery 1,200 American Standard Companies, Inc. 39,338 60,150 0.5
1,200 Ingersoll-Rand Company 54,038 65,400 0.6
----------- ----------- -------
93,376 125,550 1.1
Medical 1,900 Tenet Healthcare Corp. 50,100 52,250 0.5
Natural Gas 1,100 El Paso Natural Gas Co. 56,692 65,175 0.6
1,400 Enron Corp. 54,689 57,050 0.5
----------- ----------- -------
111,381 122,225 1.1
Oil Services 1,500 Dresser Industries, Inc. 29,046 51,375 0.5
200 Schlumberger Ltd. 12,862 23,825 0.2
650 Smith International, Inc. 29,748 34,044 0.3
----------- ----------- -------
71,656 109,244 1.0
Paper 1,200 Kimberly - Clark Corp. 46,012 60,150 0.5
Petroleum 400 Pennzoil Company 16,054 22,150 0.2
1,000 Unocal Corp. 33,402 42,625 0.4
----------- ----------- -------
49,456 64,775 0.6
Pharmaceuticals 900 American Home Products Corporation 52,940 68,625 0.6
600 Merck & Co., Inc. 20,511 53,925 0.5
----------- ----------- -------
73,451 122,550 1.1
Railroads 400 Burlington Northern Santa Fe 32,530 33,200 0.3
Real Estate Investment 1,400 Prentiss Properties Trust 28,797 32,900 0.3
Trusts 800 Starwood Lodging Trust 36,000 29,800 0.3
----------- ----------- -------
64,797 62,700 0.6
Restaurants 600 McDonald's Corp. 30,366 30,150 0.3
Retail Stores 1,255 Rite Aid Corporation 42,350 58,357 0.5
1,100 Sears, Roebuck & Co. 44,048 54,037 0.5
----------- ----------- -------
86,398 112,394 1.0
Software -- Computer 1,100 BMC Software, Inc. 41,343 59,400 0.5
Telecommunications 1,000 Airtouch Communications, Inc. 27,955 27,875 0.3
1,600 WorldCom, Inc. 39,831 47,400 0.4
----------- ----------- -------
67,786 75,275 0.7
Tobacco 850 Philip Morris Companies, Inc. 28,323 37,400 0.3
Travel & Lodging 1,400 Carnival Corporation (Class A) 40,147 53,200 0.5
Utilities -- Electric 2,800 Edison International 52,478 65,450 0.6
----------- ----------- -------
Total Common Stocks in the United States 2,157,581 2,685,442 24.3
=========== =========== =======
Total Investments in Common Stocks 7,516,989 8,780,099 79.3
=========== =========== =======
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Australia Foreign Government A$ 75,000 Australian Government Bonds, 7.50% due
Obligations 7/15/2005 57,949 57,555 0.5
----------- ----------- -------
Total Fixed-Income Securities in Australia 57,949 57,555 0.5
=========== =========== =======
Canada Foreign Government C$ 100,000 Canadian Government Bonds, 7% due 12/01/2006 75,972 75,116 0.7
Obligations ----------- ----------- -------
Total Fixed-Income Securities in Canada 75,972 75,116 0.7
=========== =========== =======
Denmark Foreign Government Dkr 1,000,000 Danish Government Bonds, 7% due 11/15/2007 159,760 158,512 1.4
Obligations ----------- ----------- -------
Total Fixed-Income Securities in Denmark 159,760 158,512 1.4
=========== =========== =======
Germany Foreign Government Bundesrepublik Deutschland:
Obligations DM 120,000 7.125% due 12/20/2002 83,338 77,002 0.7
225,000 6.50% due 10/14/2005 142,066 137,911 1.3
300,000 6% due 1/04/2007 175,240 176,838 1.6
75,000 Treuhandanstalt, 6.875% due 6/11/2003 49,876 47,512 0.4
----------- ----------- -------
Total Fixed-Income Securities in Germany 450,520 439,263 4.0
=========== =========== =======
Italy Foreign Government Lit 475,000,000 Buoni Poliennali del Tesoro, 8.50% due
Obligations 1/01/2004 314,078 298,547 2.7
----------- ----------- -------
Total Fixed-Income Securities in Italy 314,078 298,547 2.7
=========== =========== =======
Spain Foreign Government Spanish Government Bonds:
Obligations Esp 20,000,000 7.90% due 2/28/2002 162,076 150,277 1.3
21,200,000 7.35% due 3/31/2007 150,170 153,355 1.4
----------- ----------- -------
Total Fixed-Income Securities in Spain 312,246 303,632 2.7
=========== =========== =======
Sweden Foreign Government Government of Sweden:
Obligations Skr 600,000 10.25% due 5/05/2000 101,118 87,412 0.8
1,600,000 8% due 8/15/2007 240,008 221,101 2.0
----------- ----------- -------
Total Fixed-Income Securities in Sweden 341,126 308,513 2.8
=========== =========== =======
United US Government & US Treasury Notes:
States Agency Obligations US$ 50,000 6.625% due 5/15/2007 49,719 49,851 0.5
275,000 6.625% due 2/15/2027 257,895 264,946 2.4
----------- ----------- -------
Total Fixed-Income Securities in the
United States 307,614 314,797 2.9
=========== =========== =======
Total Investments in Fixed-Income Securities 2,019,265 1,955,935 17.7
=========== =========== =======
<CAPTION>
Short-Term Securities
<S> <C> <C> <C> <C> <C> <C>
United Commercial Paper* 421,000 General Motors Acceptance Corp., 5.62% due
States 6/02/1997 420,869 420,869 3.8
----------- ----------- -------
Total Investments in Short-Term Securities 420,869 420,869 3.8
=========== =========== =======
Total Investments $9,957,123 11,156,903 100.8
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts** 720 0.0
Liabilities in Excess of Other Assets (88,092) (0.8)
----------- -------
Net Assets $11,069,531 100.00%
=========== =======
Net Asset Value: Class A -- Based on net assets of $1,623,894 and 136,471 shares outstanding $11.90
===========
Class B -- Based on net assets of $8,210,572 and 692,764 shares outstanding $11.85
===========
Class C -- Based on net assets of $576,616 and 48,911 shares outstanding $11.79
===========
Class D -- Based on net assets of $658,449 and 55,266 shares outstanding $11.91
===========
</TABLE>
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
* Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
** Forward foreign exchange contracts as of May 31, 1997 were as follows:
Unrealized
Expiration Appreciation
Foreign Currency Sold Date (Depreciation)
A$ 230,000 June 1997 $4,218
C$ 700,000 June 1997 (201)
Chf 465,000 June 1997 (1,295)
DM 1,440,000 June 1997 (5,680)
Dkr 1,070,000 June 1997 1,402
Esp 56,000,000 June 1997 (2,476)
Fim 1,300,000 June 1997 796
Frf 1,750,000 June 1997 (1,742)
Lit 719,962,500 June 1997 2,606
Skr 3,440,000 June 1997 3,092
------
Total Unrealized Appreciation --
Net on Forward Foreign
Exchange Contracts
(US$ Commitment -- $3,835,996) $720
======
EQUITY PORTFOLIO CHANGES
For the Quarter Ended May 31, 1997
Additions Amer Group Ltd.
Autobacs Seven Co., Ltd.
Broken Hill Proprietary Co., Ltd.
Castellum AB
Chase Manhattan Corporation
Ciba Specialty Chemicals AG (ADR)
Computer Associates International, Inc.
Hartford Life, Inc. (Class A)
Hertz Corp. (Class A)
Ingersoll-Rand Company
Intel Corp.
McDonald's Corp.
Microsoft Corp.
Nationwide Financial Services, Inc.
Orion-yhtymae OY (Class A)
Owens-Illinois, Inc.
Oxford Health Plans, Inc.
*Rauma OY
Sasol Ltd.
Smith International, Inc.
Sony Corporation
Starwood Lodging Trust
Sunbeam-Oster Co.
Uniao de Bancos Brasileiros S.A. (GDR)
WorldCom, Inc.
Deletions Banco de Galicia y Buenos Aires
S.A. (ADR)
Banco Frances del Rio de la Plata
S.A. (ADR)
Centocor, Inc.
cisco Systems, Inc.
Citicorp
Countrywide Credit Industries, Inc.
FMC Corporation
Fisher Scientific International, Inc.
Foster Wheeler Corporation
General Electric Company
General Motors Corp.
Gulfstream Aerospace Corporation
H.J. Heinz Company
Health Management Associates, Inc. (Class A)
Lear Corporation
National Westminster Bank PLC
Nomura Securities Co., Ltd.
Northrop Grumman Corp.
Oakwood Homes Corporation
Puma AG
*Rauma OY
* Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Thomas R. Robinson, Vice President and Senior Portfolio Manager
Gerald M. Richard, Treasurer
Custodian
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800)637-3863
