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Previous: CNL AMERICAN PROPERTIES FUND INC, S-11/A, 1998-01-15 |
Next: INLAND REAL ESTATE CORP, POS AM, 1998-01-15 |
MERRILL LYNCH
ASSET GROWTH
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Quarterly Report
November 30, 1997
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on foreign
investments and on repatriation of capital invested in emerging
markets, currency fluctuations, and potential price volatility and
less liquidity of securities traded in emerging markets. In addition,
there may be less publicly available information about the issuers of
securities, and such issuers may not be subject to accounting,
auditing and financial reporting standards and requirements comparable
to those to which US companies are subject. Therefore, the Fund is
designed as a long-term investment for investors capable of assuming
the risks of investing in emerging markets. The Fund should be
considered as a vehicle for diversification and not as a complete
investment program. Please refer to the propectus for details.
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 -- 11/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH ASSET GROWTH FUND, INC.
Worldwide
Investments as of
November 30, 1997
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets+
United States* 50.4%
Germany 6.5
United Kingdom 6.2
Italy 4.8
Japan 4.2
Sweden 4.1
Finland 3.2
France 2.9
Canada 2.5
Spain 2.2
Switzerland 1.7
Denmark 1.5
South Africa 1.4
Mexico 1.3
Australia 0.8
Indonesia 0.6
Brazil 0.6
Philippines 0.4
Argentina 0.4
Norway 0.4
South Korea 0.0++
------
Total 96.1%
======
+ Total may not equal 100%.
++ Amount is less than 0.1%.
* Includes investments in short-term investments.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Pharmaceuticals 3.8%
Banking 2.9
Chemicals 2.3
Diversified 2.3
Insurance 2.3
Automobile Parts 2.1
Electronics 2.0
Computer Services & Software 2.0
Machinery 1.9
Retail Stores 1.9
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
Finnlines OY Finland 1.0%
LucasVarity PLC UK 0.9
Henkel KGaA
(Preferred) Germany 0.9
Mannesmann AG Germany 0.9
Scor S.A. France 0.9
Rio Tinto PLC UK 0.9
Roche Holding AG Switzerland 0.9
Siemens AG Germany 0.8
Novartis AG (ADR) Switzerland 0.8
Bridgestone
Corporation Japan 0.8
Merrill Lynch Asset Growth Fund, Inc., November 30, 1997
DEAR SHAREHOLDER
Volatility highlighted stock and bond markets worldwide during the
quarter ended November 30, 1997. The difficulties began in Southeast
Asia. Following currency devaluations in several Southeast Asian
countries this summer, the Hong Kong dollar -- the value of which is
pegged to the US dollar -- came under speculative attack in foreign
currency markets. Monetary authorities in Hong Kong raised interest
rates to support the currency, and the Hong Kong stock market declined
sharply. This event raised investor concerns worldwide regarding the
viability of continued global economic growth.
At first, US stock market investors focused on the challenges that
would face US multinational corporations in the wake of the poorer
Asian economic prospects. The sell-off then broadened to other stocks
as well. Although the decline proved to be short-lived, investor
confidence was not definitively restored, and stock market volatility
continued. Although the US bond market benefited during periods when
investors anticipated slower economic growth, the release of stronger-
than-expected economic statistics led to periods of declining bond
prices.
As 1997 draws to a close, investors are likely to continue to focus on
the prospects for the US economy. Although the Federal Reserve Board
did not tighten monetary policy at its November 12 meeting, it remains
to be seen whether US economic growth remains moderate enough and
inflationary pressures sufficiently contained to preclude an increase
in short-term interest rates in the near term.
Portfolio Matters
As of November 30, 1997, the Fund's asset allocation was: foreign
stocks, 31% of net assets; US stocks, 24%; foreign bonds, 15%; US
bonds, 14%; and cash reserves, 16%.
During the three months ended November 30, 1997, we became more
cautious toward foreign stocks. Our concerns over the widening
economic problems in Asia, including South Korea, Japan and Southeast
Asia, led us to reduce our allocation to foreign equities from 52% of
net assets as of August 31, 1997 to 31% of net assets as of November
30, 1997. In our opinion, the potential for the problems in Asia to
have a greater-than-expected impact on economies outside the region,
and in particular the United States, justifies our temporarily holding
the total equity weighting in the Fund to less than 65% of net assets.
In reducing our foreign equity representation, we lowered our relative
position in Japan from an already underweighted posture as compared to
the benchmark unmanaged Morgan Stanley Europe, Australia, Far East
Index. In addition to reducing individual commitments, we liquidated
positions in Canon, Inc., Autobacs Seven Co., Ltd., Mitsubishi Heavy
Industries, Ltd., Mitsubishi Electric Co. and Toray Industries, Inc.
We are concerned that the uncertainties surrounding the Japanese
financial structure and economy will limit the recovery potential in
the Japanese stock market over coming months.
The reduction of European equity representation was more limited in
scope, given a relatively favorable economic background for European
economies. Similarly, we maintained a significant representation in
Latin America, where prospects appear more favorable than was the case
for the emerging Asian markets. As for Asia, we lowered our already
limited representation through the sale of HSBC Holdings PLC.
The reduction of equity representation was concentrated in
international markets, while the weighting of US equities was
unchanged during the three months ended November 30, 1997. Consistent
with our expectation of further US interest rate declines, financial
services equities continued to account for the largest concentration
of assets in the US stock market. We maintained significant
representation in the areas of healthcare, technology and energy.
Overall, we are increasing emphasis on the shares of companies which,
in our view, have limited potential for earnings disappointments
resulting from the problems afflicting the Asian economies.
The assets resulting from the reduction of foreign equity
representation were directed to foreign and US bonds, as well as cash
reserves. In the foreign bond sector, we added to commitments in
German, Italian and Swedish bonds, and we initiated a position in
French obligations. The bulk of our foreign bond weighting remains
concentrated in Europe, including markets previously mentioned, as
well as Denmark and Spain. During October, we became less confident
that US dollar strength would continue against the European
currencies. Given this changed assessment, we lifted the hedges
against commitments in European stocks and bonds. On the other hand,
the Fund's residual commitment to Japanese equities remains hedged
back to the US dollar, since we expect yen weakness to continue in
coming months.
In the US bond sector, we maintained the Fund's average duration at
5.6 years as of November 30, 1997. Our optimistic stance toward US
bonds reflected indications that inflationary pressures in the US
economy were exceptionally subdued. The problems in Asian economies
and a resultant slowdown in the US economy seemed likely to accentuate
the trend toward lower inflation. At the same time the rapid
shrinkage, if not outright elimination, of the Federal budget deficit
was expected to continue to reduce the supply of newly issued US
Government securities relative to demand.
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 semi-annual report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/THOMAS R. ROBINSON
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
December 31, 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 9/30/97 +22.51% +16.08%
Inception (9/02/94)
through 9/30/97 + 9.63 + 7.72
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +21.19% +17.19%
Inception (9/02/94)
through 9/30/97 + 8.49 + 8.22
* 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 9/30/97 +21.20 +20.20%
Inception (10/21/94)
through 9/30/97 + 9.47 + 9.47
* 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 9/30/97 +22.10% +15.69%
Inception (10/21/94)
through 9/30/97 +10.33 + 8.33
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Recent
Performance
Results*
12 Month 3 Month
11/30/97 8/31/97 11/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $11.81 $12.28 $11.26 +4.88% -3.83%
Class B Shares 11.70 12.20 11.19 +4.56 -4.10
Class C Shares 11.64 12.13 11.14 +4.49 -4.04
Class D Shares 11.81 12.28 11.23 +5.16 -3.83
Class A Shares - Total Return +6.47(1) -3.83
Class B Shares - Total Return +5.33(2) -4.10
Class C Shares - Total Return +5.36(3) -4.04
Class D Shares - Total Return +6.20(4) -3.83
* 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 --11/30/97 10.97 11.81 -- -- + 7.66
Total $0.427
Cumulative total return as of 11/30/97: +23.19%**
* 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 -- 11/30/97 10.97 11.70 -- -- + 6.65
Total $0.185
Cumulative total return as of 11/30/97: +19.14%**
* 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 -- 11/30/97 10.92 11.64 -- -- + 6.59
Total $0.233
Cumulative total return as of 11/30/97: +20.94%**
* 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 -- 11/30/97 11.00 11.81 -- -- + 7.36
Total $0.349
Cumulative total return as of 11/30/97: +24.00%**
* 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>
Merrill Lynch Asset Growth Fund, Inc., November 30, 1997
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 1,200 Yacimientos Petroliferos Fiscales S.A. (ADR)(a) $32,247 $40,275 0.4%
--------- --------- -----
Total Common Stocks in Argentina 32,247 40,275 0.4
========= ========= =====
Australia Diversified 9,000 Broken Hill Proprietary Co., Ltd. 118,416 82,723 0.8
--------- --------- -----
Total Common Stocks in Australia 118,416 82,723 0.8
========= ========= =====
Brazil Banking 900 Uniao de Bancos Brasileiros S.A. (GDR)(b) 30,375 25,875 0.2
Telecommunications 400 Telecomunicacoes Brasileiras S.A. - Telebras
(ADR)(a) 29,774 41,750 0.4
--------- --------- -----
Total Common Stocks in Brazil 60,149 67,625 0.6
========= ========= =====
Canada Automobile Parts 1,300 Magna International, Inc. 66,479 82,063 0.8
Entertainment 2,800 Imax Corporation 45,392 68,950 0.6
Oil & Gas
Producers 5,600 Gulf Canada Resources Ltd. 52,008 39,200 0.4
--------- --------- -----
Total Common Stocks in Canada 163,879 190,213 1.8
========= ========= =====
Finland Diversified 3,900 Amer Group Ltd. 69,341 84,409 0.8
Paper & Forest
Products 4,000 UPM - Kymmene OY 85,779 85,972 0.8
Pharmaceuticals 1,800 Orion - yhtymae OY (Class B) 68,840 69,266 0.6
Transportation 2,600 Finnlines OY 48,128 103,467 1.0
--------- --------- -----
Total Common Stocks in Finland 272,088 343,114 3.2
========= ========= =====
France Reinsurance 2,100 Scor S.A. 80,359 90,333 0.9
Semiconductor
Capital 800 SGS - Thomson Microelectronics N.V.
Equipment (NY Registered Shares) 44,695 56,150 0.5
--------- --------- -----
Total Common Stocks in France 125,054 146,483 1.4
========= ========= =====
Germany Banking 900 Bayerische Vereinsbank AG 54,210 53,450 0.5
Chemicals 200 Henkel KGaA 8,891 11,226 0.1
1,600 Henkel KGaA (Preferred) 68,038 98,333 0.9
--------- --------- -----
76,929 109,559 1.0
Electrical
Equipment 1,500 Siemens AG 68,529 88,063 0.8
Machinery &
Equipment 200 Mannesmann AG 70,345 93,094 0.9
--------- --------- -----
Total Common Stocks in Germany 270,013 344,166 3.2
========= ========= =====
Indonesia Telecommunications 3,090 P.T. Indonesian Satellite Corp. (ADR)(a) 97,002 69,139 0.6
--------- --------- -----
Total Common Stocks in Indonesia 97,002 69,139 0.6
========= ========= =====
Italy Apparel 2,000 Gucci Group N.V. (NY Registered Shares) 142,007 81,375 0.8
Machinery 23,000 Danieli & C. Officine Meccaniche S.p.A. 67,768 81,292 0.7
Publishing 7,000 Mondadori (Arnoldo) Editore S.p.A. 59,094 55,520 0.5
--------- --------- -----
Total Common Stocks in Italy 268,869 218,187 2.0
========= ========= =====
Japan Building &
Construction 10,000 Maeda Corp. 102,085 30,956 0.3
5,000 Matsushita Electric Works, Ltd. 56,913 40,752 0.4
12,000 Okumura Corp. 96,740 39,498 0.4
--------- --------- -----
255,738 111,206 1.1
Consumer --
Electronics 3,000 Matsushita Electric Industrial Co., Ltd. 46,795 46,787 0.4
Electronics 1,000 Sony Corporation 72,316 85,423 0.8
400 Sony Corporation (ADR)(a) 29,432 33,400 0.3
--------- --------- -----
101,748 118,823 1.1
Insurance 5,000 Tokio Marine & Fire Insurance Co., Ltd. 48,825 47,414 0.5
Merchandising 2,000 Amway Japan, Ltd. 69,732 31,505 0.3
Tires & Rubber 4,000 Bridgestone Corporation 68,942 86,834 0.8
Warehouse &
Storage 1,000 Mitsui - Soko Co., Ltd. 8,374 3,056 0.0
--------- --------- -----
Total Common Stocks in Japan 600,154 445,625 4.2
========= ========= =====
Mexico Beverages 1,200 Panamerican Beverages, Inc. (Class A) 34,829 41,100 0.4
Financial
Services 2,150 Grupo Financiera Bancomer S.A. (Class B) (ADR)
(a) 30,689 25,048 0.2
Multi-Industry 3,600 Grupo Carso, S.A. de C.V. (ADR)(a) 41,850 44,550 0.4
Telecommunications 550 Telefonos de Mexico, S.A. de C.V. (ADR)(a) 23,202 27,225 0.3
--------- --------- -----
Total Common Stocks in Mexico 130,570 137,923 1.3
========= ========= =====
Norway Cruise Lines 10,000 Color Line ASA 37,601 38,940 0.4
--------- --------- -----
Total Common Stocks in Norway 37,601 38,940 0.4
========= ========= =====
Philippines Beverages 36,220 San Miguel Corp. (Class B) 107,774 45,471 0.4
--------- --------- -----
Total Common Stocks in the Philippines 107,774 45,471 0.4
========= ========= =====
South Africa Diversified 7,400 Sasol Ltd. 86,342 74,610 0.7
Mining 3,800 De Beers Consolidated Mines Ltd. (ADR)(a) 129,201 79,088 0.7
--------- --------- -----
Total Common Stocks in South Africa 215,543 153,698 1.4
========= ========= =====
South Korea Engineering &
Construction 2,753 Hyundai Engineering & Construction Co., Ltd.
(GDR)(b) 35,336 3,441 0.0
--------- --------- -----
Total Common Stocks in South Korea 35,336 3,441 0.0
========= ========= =====
Spain Petroleum 2,000 Repsol, S.A. (ADR)(a) 71,308 86,250 0.8
--------- --------- -----
Total Common Stocks in Spain 71,308 86,250 0.8
========= ========= =====
Sweden Banking 3,200 Sparbanken Sverige AB (Class A) 40,252 81,443 0.7
Chemicals 3,000 Perstorp AB (Class B) 56,249 53,234 0.5
Investment
Management 3,900 Bure Investment AB 32,910 51,019 0.5
Laser Components 1,600 Spectra-Physics AB (Class A) 48,844 40,722 0.4
Real Estate
Investment Trusts 2,600 Castellum AB 17,442 24,415 0.2
--------- --------- -----
Total Common Stocks in Sweden 195,697 250,833 2.3
========= ========= =====
Switzerland Pharmaceuticals 1,100 Novartis AG (ADR)(a) 47,575 88,000 0.8
10 Roche Holding AG 83,503 89,531 0.9
--------- --------- -----
Total Common Stocks in Switzerland 131,078 177,531 1.7
========= ========= =====
United Kingdom Automobile Parts 31,100 LucasVarity PLC 100,264 99,519 0.9
Beverages 9,500 Grand Metropolitan PLC 64,774 86,239 0.8
Chemicals 5,800 Imperial Chemical Industries PLC (Ordinary) 70,683 85,571 0.8
Mining 7,500 Rio Tinto PLC 114,244 90,315 0.9
Retail Stores 5,900 Dixons Group PLC 62,128 66,924 0.6
--------- --------- -----
Total Common Stocks in the United Kingdom 412,093 428,568 4.0
========= ========= =====
United States Aerospace & 1,275 AlliedSignal, Inc. 48,185 47,334 0.4
Defense 1,000 GenCorp, Inc. 29,255 25,063 0.2
640 United Technologies Corp. 32,611 47,960 0.5
--------- --------- -----
110,051 120,357 1.1
Airlines 1,200 US Airways Group Inc. 44,104 66,150 0.6
Appliances 1,100 Sunbeam Corp. 43,001 48,469 0.5
Automobile Parts 1,050 Federal - Mogul Corp. 39,921 43,181 0.4
Automobile Rental 1,300 Avis Rent A Car, Inc. 28,429 43,631 0.4
& Leasing 1,025 Hertz Corp. (Class A) 30,890 40,423 0.4
--------- --------- -----
59,319 84,054 0.8
Banking 1,000 Bank of New York Company, Inc. (The) 21,405 53,750 0.5
600 BankAmerica Corp. 30,788 43,800 0.4
1,200 First Union Corp. 59,009 58,500 0.6
--------- --------- -----
111,202 156,050 1.5
Broadcasting -- 2,863 Tele-Communications, Inc. (Class A) 50,198 65,491 0.6
Cable 1,637 Tele-Communications TCI Ventures Group (Class A) 28,704 37,037 0.4
--------- --------- -----
78,902 102,528 1.0
Computer 280 Cisco Systems, Inc. 23,938 24,133 0.2
Services & 1,050 Computer Associates International, Inc. 28,883 54,666 0.5
Software 500 International Business Machines Corp. 27,474 54,781 0.5
260 Microsoft Corp. 32,446 36,774 0.4
1,348 Oracle Corp. 33,595 44,821 0.4
--------- --------- -----
146,336 215,175 2.0
Computers 400 COMPAQ Computer Corp. 11,985 24,975 0.2
1,240 Quantum Corp. 35,227 32,783 0.3
--------- --------- -----
47,212 57,758 0.5
Consumer Products 1,000 Black & Decker Corporation 33,358 36,750 0.4
1,815 Dial Corp. 35,040 35,166 0.3
--------- --------- -----
68,398 71,916 0.7
Containers 1,600 Owens-Illinois, Inc. 46,170 54,200 0.5
Cruise Lines 500 Royal Caribbean Cruises Ltd. 21,120 24,000 0.2
Dental Supplies
& Equipment 1,200 DENTSPLY International Inc. 30,168 32,400 0.3
Electronics 640 General Electric Company 45,058 47,200 0.4
1,500 National Semiconductor Corp. 60,680 49,688 0.5
--------- --------- -----
105,738 96,888 0.9
Financial Services 380 American Express Company 18,458 29,973 0.3
820 MGIC Investment Corp. 32,022 47,919 0.4
--------- --------- -----
50,480 77,892 0.7
Insurance 400 Hartford Life, Inc. (Class A) 12,984 15,350 0.1
1,800 Provident Companies, Inc. 59,821 59,063 0.6
1,095 Travelers Group Inc. 39,718 55,298 0.5
450 Travelers Property Casualty Corp. (Class A) 17,942 17,887 0.2
900 UNUM Corporation 28,563 42,694 0.4
--------- --------- -----
159,028 190,292 1.8
Leisure/Tourism 1,400 Brunswick Corporation 35,048 46,812 0.4
Machinery 700 Harnischfeger Industries, Inc. 30,309 26,731 0.3
1,325 Ingersoll-Rand Company 39,821 54,159 0.5
600 SPX Corp. 33,940 41,025 0.4
--------- --------- -----
104,070 121,915 1.2
Medical Services 964 HEALTHSOUTH Corp. 26,033 25,305 0.2
Natural Gas 1,100 El Paso Natural Gas Co. 56,692 67,512 0.7
600 Enron Corp. 23,590 23,250 0.2
--------- --------- -----
80,282 90,762 0.9
Office Equipment 640 Danka Business Systems PLC (ADR)(a)(c) 31,542 23,360 0.2
Oil Services 500 Dresser Industries, Inc. 9,682 18,687 0.2
400 Schlumberger Ltd. 12,862 32,925 0.3
650 Smith International, Inc. 29,748 41,600 0.4
--------- --------- -----
52,292 93,212 0.9
Petroleum 1,140 Unocal Corp. 39,218 45,386 0.4
Pharmaceuticals 500 Bristol-Myers Squibb Co. 47,550 46,812 0.4
385 Lilly (Eli) and Co. 23,950 24,279 0.2
650 Pfizer Inc. 47,538 47,287 0.5
325 Warner-Lambert Co. 46,495 45,459 0.4
--------- --------- -----
165,533 163,837 1.5
Railroads 500 Burlington Northern Santa Fe 41,528 45,750 0.4
Real Estate 1,300 Glenborough Realty Trust, Inc. 32,500 35,100 0.3
Investment 1,400 Prentiss Properties Trust 28,797 36,225 0.4
Trusts 600 Starwood Lodging Trust 27,000 32,175 0.3
--------- --------- -----
88,297 103,500 1.0
Restaurants 700 Tricon Global Restaurants, Inc. 24,108 23,669 0.2
Retail Stores 1,005 Rite Aid Corporation 35,356 66,079 0.6
550 Safeway, Inc. 30,254 33,412 0.3
800 Sears, Roebuck & Co. 32,132 36,650 0.4
--------- --------- -----
97,742 136,141 1.3
Software -- 895 BMC Software, Inc. 33,632 58,063 0.5
Computer
Telecommunications 1,600 WorldCom, Inc. 39,831 51,200 0.5
Transport Services 1,200 OMI Corp. 15,586 12,300 0.1
Travel & Lodging 900 Carnival Corporation (Class A) 25,889 48,656 0.5
Utilities --
Electric 1,900 Edison International 35,667 50,944 0.5
--------- --------- -----
Total Common Stocks in the United States 2,097,448 2,582,122 24.2
========= ========= =====
Total Investments in Common Stocks 5,442,319 5,852,327 54.7
========= ========= =====
<CAPTION>
Face
Amount Fixed-Income Securities
<S> <C> <C> <C> <C> <C> <C>
Canada Foreign
Government C$ 100,000 Canadian Government Bonds, 7% due 12/01/2006 75,972 77,319 0.7
Obligations
--------- --------- -----
Total Fixed-Income Securities in Canada 75,972 77,319 0.7
========= ========= =====
Denmark Foreign
Government Dkr 1,000,000 Danish Government Bonds, 7% due 11/15/2007 159,760 160,810 1.5
Obligations
--------- --------- -----
Total Fixed-Income Securities in Denmark 159,760 160,810 1.5
========= ========= =====
France Foreign
Government Frf 920,000 French Government Bonds, 5.50% due 10/25/2007 151,478 156,412 1.5
Obligations
--------- --------- -----
Total Fixed-Income Securities in France 151,478 156,412 1.5
========= ========= =====
Germany Foreign
Government Bundesrepublik Deutschland:
Obligations DM 225,000 6.50% due 10/14/2005 142,066 136,559 1.3
165,000 6% due 7/04/2007 96,503 96,972 0.9
130,000 6% due 6/20/2016 72,326 75,075 0.7
75,000 Treuhandanstalt, 6.875% due 6/11/2003 49,877 45,975 0.4
--------- --------- -----
Total Fixed-Income Securities in Germany 360,772 354,581 3.3
========= ========= =====
Italy Foreign
Government Lit 450,000,000 Buoni Poliennali del Tesoro, 8.50% due
Obligations 8/01/2004 292,885 299,184 2.8
--------- --------- -----
Total Fixed-Income Securities in Italy 292,885 299,184 2.8
========= ========= =====
Spain Foreign
Government Pta 20,000,000 Spanish Government Bonds, 7.90% due 2/28/2002 162,076 147,601 1.4
Obligations
--------- --------- -----
Total Fixed-Income Securities in Spain 162,076 147,601 1.4
========= ========= =====
Sweden Foreign
Government Skr 1,300,000 Government of Sweden, 8% due 8/15/2007 185,475 189,643 1.8
Obligations
--------- --------- -----
Total Fixed-Income Securities in Sweden 185,475 189,643 1.8
========= ========= =====
United Kingdom Foreign
Government [POUND] 135,000 UK Treasury Gilt, 7.25% due 12/07/2007 223,453 239,872 2.2
Obligations
--------- --------- -----
Total Fixed-Income Securities in the
United Kingdom 223,453 239,872 2.2
========= ========= =====
United States US
Government US$ 570,000 US Treasury Bonds, 6.625% due 2/15/2027 577,042 610,345 5.7
Agency Obligations US Treasury Notes:
500,000 6% due 8/15/1999 501,367 501,560 4.7
110,000 6.50% due 5/31/2002 110,739 112,681 1.1
125,000 6.25% due 2/15/2007 124,910 127,989 1.2
95,000 6.625% due 5/15/2007 96,174 99,913 0.9
--------- --------- -----
Total Fixed-Income Securities in the
United States 1,410,232 1,452,488 13.6
========= ========= =====
Total Investments in Fixed-Income Securities 3,022,103 3,077,910 28.8
========= ========= =====
<CAPTION>
Short-Term Securities
<S> <C> <C> <C> <C> <C> <C>
United States Commercial Paper* 443,000 General Motors Acceptance Corp., 5.75% due
12/01/1997 442,858 442,858 4.2
US Government 900,000 Federal National Mortgage Association,
Agency Obligations* 5.52% due 12/03/1997 899,448 899,448 8.4
---------- --------- -----
Total Investments in Short-Term Securities 1,342,306 1,342,306 12.6
========== ========= =====
Total Investments $9,806,728 10,272,543 96.1
==========
Unrealized Depreciation on Forward Foreign Exchange Contracts** (7,985) (0.1)
Other Assets Less Liabilities 424,977 4.0
----------- -----
Net Assets $10,689,535 100.0%
=========== =====
Net Asset Value: Class A -- Based on net assets of $1,771,629 and 150,022
shares outstanding $11.81
===========
Class B -- Based on net assets of $8,065,607 and 689,278
shares outstanding $11.70
===========
Class C -- Based on net assets of $522,196 and 44,868
shares outstanding $11.64
===========
Class D -- Based on net assets of $330,103 and 27,956
shares outstanding $11.81
===========
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) Consistent with the general policy of the Securities and Exchange
Commission, the nationality or domicile of an issuer for determination
of foreign issuer status may be (i) the country under whose laws the
issuer is organized, (ii) the country in which the issuer's securities are
principally traded, or (iii) the country in which the issuer derives a
significant proportion (at least 50%) of its revenue or profits from goods
produced and sold, investments made, or services performed in the
country, in which at least 50% of the assets of the issuer are situated.
* Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown are the discount
rates paid at the time of purchase by the Fund.
** Forward foreign exchange contracts as of November 30, 1997 were
as follows:
<CAPTION>
Unrealized
Expiration Appreciation
Foreign Currency Sold Date (Depreciation)
<S> <C> <C> <C>
A$ 115,000 December 1997 $1,664
[POUND] 250,000 January 1998 (16,357)
(yen) 51,300,000 December 1997 6,708
Total Unrealized Depreciation -- Net on Forward
Foreign Exchange Contracts (US$Commitment --
$893,883) $(7,985)
========
</TABLE>
<TABLE>
<CAPTION>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended November 30, 1997
<S> <C> <C> <C>
Additions Avis Rent A Car, Inc. Glenborough Realty Trust, Inc. Pfizer Inc.
Bayerische Vereinsbank AG Gulf Canada Resources Ltd. Royal Caribbean Cruises Ltd.
Bristol-Myers Squibb Co. * Gulf Indonesia Resources Ltd. Spectra-Physics AB (Class A)
Cisco Systems, Inc. Harnischfeger Industries, Inc. Tele-Communications TCI Ventures
Dial Corp. Lilly (Eli) and Co. Group (Class A)
First Union Corp. National Semiconductor Corp. Tricon Global Restaurants, Inc.
General Electric Company OMI Corp. Warner-Lambert Co.
Deletions ABB AG Companhia Cervejaria Brahma Oxford Health Plans, Inc.
ABN AMRO Holding N.V. S.A. PN (Preferred) Pennzoil Company
Airtouch Communications, Inc. du Pont (E.I.) de Nemours & Co. Philip Morris Companies, Inc.
Allstate Corp. * Gulf Indonesia Resources Ltd. Potash Corp. of Saskatchewan, Inc.
American Home Products Corporation HSBC Holdings PLC Rohm Co., Ltd.
American Standard Companies, Inc. Horizon/CMS Healthcare Corp. TCI Pacific Communications
Autobacs Seven Co., Ltd. Intel Corp. (Convertible Preferred)
Avon Products, Inc. Merck & Co., Inc. Toray Industries, Inc.
Banc One Corp. Mitsubishi Electric Co. Usinor-Sacilor S.A.
Boots Company PLC Mitsubishi Heavy Industries, Ltd. Vodafone Group PLC
Canon, Inc. Nationwide Financial Services, Inc.
* Added and deleted in the same quarter.
</TABLE>
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
Thomas R. Robinson, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, Secretary
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
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