MERRILL
LYNCH
FUND FOR
TOMORROW,
INC.
Semi-Annual Report July 31, 1994
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.
Merrill Lynch
Fund For Tomorrow, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH FUND FOR TOMORROW, INC.
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX,
GRAPHIC AND IMAGE MATERIAL: Item 1.
<PAGE>
DEAR SHAREHOLDER
The expectation of increasing inflationary pressures
and higher interest rates initially heightened investor
concerns and increased financial market volatility
during the July quarter. However, as the quarter
progressed, it was the weakness of the US dollar in
foreign exchange markets that dominated the finan-
cial news and prolonged stock and bond market
declines. Although the US dollar had strengthened
slightly by July quarter-end, which may have improved
investor confidence in the stock and bond markets,
the possibility of continued tightening by the Federal
Reserve Board resurfaced following Chairman Alan
Greenspan's recent Congressional testimony. Never-
theless, as the quarter drew to a close, a lower-than-
expected rate of growth reported for the US economy
during the second calendar quarter allayed investor
concerns and led to stock and bond market rallies.
During the July quarter, the US dollar's weakness
relative to other major currencies reflected the deteri-
orating US trade deficit and widening net long-term
capital outflows. In 1993, an expanding US economy
and recession in other industrial countries led to a
higher level of imports and weaker export growth,
widening the US trade deficit further. In addition,
global investors favored non-US dollar denominated
assets throughout 1993, which has further depressed
the dollar's value. This trend is not improving signifi-
cantly thus far in 1994 since foreign inflows into
US capital markets continue to decline, although US
investors are investing outside of the United States
to a lesser degree.
<PAGE>
Over the longer term, if the economies of the United
States' major trading partners expand (improving
the prospects for US export growth), the outlook for
the US dollar is likely to improve. In the near term,
central banks have attempted to reverse the dollar's
decline through currency market intervention. These
efforts have met with limited success thus far, giving
rise to the concern that the Federal Reserve Board
will be forced to continue to raise short-term interest
rates to attract investment capital back to the United
States and bolster the dollar's value. However, further
interest rate increases may jeopardize the US eco-
nomic expansion. Despite evidence of a moderating
trend in the US economy, Federal Reserve Board
Chairman Alan Greenspan indicated in his July
Humphrey-Hawkins testimony that the central bank
would prefer to err on the side of too much monetary
tightening rather than too little. In the weeks ahead,
investors will continue to assess economic data and
inflationary trends as they focus on the US dollar in
order to gauge whether further increases in short-
term interest rates are imminent. Continued indica-
tions of moderate and sustainable levels of economic
growth would be positive for the US capital markets.
Portfolio Matters
Throughout the Fund's second fiscal quarter ended
July 31, 1994, the popular stock market averages
seemed to exhibit a trendless pattern of activity.
The US equity markets showed only a nominal gain as
measured by the broad Standard & Poor's 500 Index
and a moderate decline in the smaller-capitalization
NASDAQ Industrial Index. Merrill Lynch Fund For
Tomorrow, Inc.'s Class A and Class B Shares experi-
enced declines in per share net asset values, largely
as a result of weakness in the portfolio's more
aggressive growth issues. As mentioned in our last
report to shareholders, smaller aggressive growth
companies with higher risk/return characteristics are
often less attractive to investors who may be seeking
a more defensive posture in an uncertain stock market
environment. However, while we have recently shifted
some of the Fund's assets toward larger, potentially
less volatile investments, we continue to favor smaller
growth companies for long-term appreciation. This
longer-term bias is primarily based on the prospects
for a moderate growth economy having a greater
duration than previous cycles. Continued growth in
the domestic economy, combined with emerging
economic recovery in several regions abroad, could
also help extend the current upturn in earnings
among many global companies. Therefore, while our
tactical strategy presently may reflect increased
emphasis on value and predictability, our strategic
focus remains long-term growth.
<PAGE>
Despite the fact that the major stock market indexes
showed little progress during the July quarter, there
was a somewhat disturbing pattern of share price
volatility during the period. This volatility seemed
to be most evident in the smaller growth stock sector,
but larger, higher-quality issues were also affected.
Typically, this stock market behavior arises when
there is widespread uncertainty regarding the
economy and a possible rise in interest rates; this
engenders the perception of higher risk associated
with common stock investments. While we believe
that the domestic economy remains strong and com-
mon stocks remain attractive, we attempted to adjust
our investment strategy toward two specific goals:
moderating risk, and increasing our focus on value. In
addition, we slightly raised the Fund's cash position
to 7.8% of assets at quarter-end from 6.6% at the end
of the April quarter. Among the 11 new holdings
established during the quarter, five can be classified
as large-capitalization companies with below-average
price/earnings ratios and potentially lower price
volatility. We purchased the remaining six holdings
for reasons specific to their unique growth
characteristics.
At the end of the April quarter, the Fund was com-
prised of 14 "macro" investment concepts. During the
July quarter, we added one new investment concept:
extended economic cycles. We established this new
concept on the premise that global economic inter-
dependence is producing longer but more moderate
economic cycles. As a result, many companies which
historically have had sharp but brief periods of earn-
ings gains now have the potential for more extended
periods of growth. Typically, the stocks of these com-
panies sell at below-average price/earnings ratios
because their growth phase historically has been
highly cyclical and of relatively short duration. We
believe the likely advent of longer economic cycles in
the future has created an anomaly between valuation
and growth potential which for many companies
presents attractive buying opportunities. Within the
parameters of this new investment concept, the Fund
took positions in four companies with substantial
earnings potential and low valuations. Bethlehem
Steel Corp. is currently benefiting from surging steel
demand, higher prices and internal cost-cutting
efforts. Similarly, Rohm & Haas Co. is showing rapid
earnings growth from its chemical operations both in
the United States and internationally. Caterpillar,
Inc., along with Deere & Co., are experiencing strong
demand for their construction and agricultural
machinery worldwide. In each case, we believe the
current valuations of these stocks do not reflect their
potential for continued earnings growth which could
result from extended economic cycles.
<PAGE>
Other additions to the portfolio include Whirlpool
Corp., which is in a major program of global
expansion and could augment the long-term growth
potential of its household appliance products. We
added two stocks to the Fund's demographic trends
concept, ADT Ltd. and Rollins, Inc. These companies are
major participants in the areas of home security and
protective services, two areas which are experienc-
ing rising demand. We added Sun Microsystems, Inc.
and Videologic Group PLC to our computer technol-
ogies concept, and Variflex, Inc., which specializes in
current recreational trends such as rollerblade
skating, to the future retailing concept. Finally, we
took an initial position in Kenetech Corp., which is at
the leading edge of wind power technology. This
relatively small company currently has a $2 billion
backlog for its new wind-driven electrical power
turbine and is attempting to meet rising regulatory
demand for cost-effective alternative power sources
around the world.
During the July quarter, sales of securities were
primarily based on profit-taking opportunities and
changes in the fundamental outlook for specific
holdings. Along with the new holdings mentioned
above, overall investment activity resulted in various
changes in the Fund's allocation of assets among its
concept sectors. One of the more significant of these
changes occurred within the developing foreign
economies concept, where growing political and
economic uncertainties in China and Latin America
caused us to reduce exposure to those countries.
The industrial renaissance concept rose by nearly
two percentage points as a result of additions to
existing holdings and price appreciation. During the
July quarter, we reduced the global market expan-
sion concept by 1.4 percentage points through the
elimination of CPC International Inc., partial sales
of American Express Co. and a sharp decline in
the price of PepsiCo, Inc., the result of
disappointing earnings, which are of a temporary
nature, in our opinion. Finally, we decided to
combine the Fund's two healthcare concepts into
one which we believe better reflects the overall
investment opportunities in the long-term trend
toward cost-effective healthcare.
<PAGE>
We also made some significant changes in the make-up
of the portfolio's overall growth stock characteristics.
The balance between the more stable growth and
the emerging growth categories shifted toward the
former. This shift was primarily the result of our
increased weighting of the most stable growth seg-
ment in the portfolio and a decrease within the two
emerging growth segments. A graphical representa-
tion of the Fund's concept sectors and growth char-
acteristics is provided on page 1 of this report.
In Conclusion
Despite continued caution in the financial markets,
the investment outlook for the balance of 1994
appears favorable. For the most part, the recent
concerns over rising inflation and interest rates have
not been supported by actual results, which have
exhibited continued stability. We believe the key
question regarding the investment outlook is whether
the economy will continue its moderate growth or
soon reach its peak and then drift lower. Our invest-
ment strategy going forward is based on a longer but
moderated trend upward, with reasonably steady
gains in corporate profits. We also believe that this
economic scenario suggests positive earnings growth
and attractive valuations among larger, economically
sensitive stocks and above-average price performance
among small-capitalization growth stocks. We expect
to find additional opportunities in several of our
investment concepts, most notably in our new
extended economic cycles, global market expansion
and industrial renaissance concepts. Many companies
representing these concepts currently are excellent
values and have the potential for major earnings
growth. The moderate growth/longer duration eco-
nomic scenario also favors smaller aggressive growth
issues which tend to benefit from improving investor
confidence. Merrill Lynch Fund For Tomorrow, Inc.
is well-represented in these stock market sectors. We
also expect to uncover additional macroinvestment
concepts which we believe could provide an important
contribution to successful long-term investing in the
years ahead.
We appreciate your ongoing interest in Merrill Lynch
Fund For Tomorrow, Inc., and we look forward to
assisting you with your financial needs and objectives
in the months and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent P. Dileo)
Vincent P. Dileo
Vice President and Portfolio Manager
August 25, 1994
PERFORMANCE DATA
None of the past results shown should be considered a
representation of future performance. Investment return
and principal value of Class A and Class B Shares will
fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Period Net Asset Value Capital Gains
Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/26/88--12/31/88 $16.05 $14.08 $1.471 $0.134 - 2.21%
1989 14.08 16.85 1.035 0.409 +30.13
1990 16.85 14.92 0.371 0.401 - 6.98
1991 14.92 16.71 2.199 0.553 +32.23
1992 16.71 16.37 0.679 0.612 + 6.12
1993 16.37 15.85 1.920 0.308 +11.42
1/1/94--7/31/94 15.85 13.72 0.548 0.199 - 8.55
------ ------
Total $8.223 Total $2.616
Cumulative total return as of 7/31/94: +69.23%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do
not include sales charge; results would be lower if sales charge
was included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Period Net Asset Value Capital Gains
Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
3/5/84--12/31/84 $10.00 $10.98 -- $0.130 +11.12%
1985 10.98 13.37 $ 0.250 0.130 +25.75
1986 13.37 15.18 0.080 0.100 +14.90
1987 15.18 12.98 1.441 0.163 - 5.09
1988 12.98 14.07 1.555 0.201 +22.09
1989 14.07 16.85 1.035 0.227 +28.88
1990 16.85 14.92 0.371 0.235 - 7.96
1991 14.92 16.70 2.199 0.374 +30.79
1992 16.70 16.37 0.679 0.438 + 5.07
1993 16.37 15.77 1.920 0.217 +10.27
1/1/94--7/31/94 15.77 13.58 0.548 0.185 - 9.08
------- ------
Total $10.078 Total $2.400
Cumulative total return as of 7/31/94: +204.06%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do
not reflect deduction of any sales charge; results would be lower
if sales charge was deducted.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/94 - 2.02% - 8.39%
Five Years Ended 6/30/94 + 6.91 + 5.48
Inception (10/26/88) + 9.02 + 7.74
through 6/30/94
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
<PAGE>
Class B Shares*
Year Ended 6/30/94 - 2.98% - 6.32%
Five Years Ended 6/30/94 + 5.81 + 5.81
Ten Years Ended 6/30/94 +11.00 +11.14
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
7/31/94 4/30/94 7/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Fund For Tomorrow, Inc. Class A Shares $13.72 $14.64 $15.07 +1.15%(1) -2.41%(2)
ML Fund For Tomorrow, Inc. Class B Shares 13.58 14.52 15.06 +0.25(1) -2.56(2)
Standard & Poor's 500 Index** 458.26 450.91 448.13 +2.26 +1.63
NASDAQ Industrial Index** 728.78 764.39 717.14 +1.62 -4.66
ML Fund For Tomorrow, Inc. Class A Shares--Total Return +3.50(3) -0.99(4)
ML Fund For Tomorrow, Inc. Class B Shares--Total Return +2.46(5) -1.25(6)
Standard & Poor's 500 Index--Total Return** +5.14 +2.39
<FN>
*Investment results shown for the 3-month and 12-month periods are
before the deduction of any sales charges.
**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 $1.588 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.548 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.342 per share ordinary
income dividends and $1.588 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.199 per share ordinary
income dividends and $0.548 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.323 per share ordinary
income dividends and $1.588 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.185 per share ordinary
income dividends and $0.548 per share capital gains distributions.
</TABLE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Vincent P. Dileo, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Susan B. Baker, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Value Percent of
Concept Tomorrow Shares Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Computer Technologies
Personal Computers 100,000 Apple Computer, Inc. $ 4,868,130 $ 3,362,500 1.0%
Components 140,000 ++Creative Technology, Ltd. (Ordinary) 1,965,000 2,922,500 0.9
Semiconductors 50,000 Intel Corp. 3,193,750 2,950,000 0.9
Information Systems 50,000 ++Sun Microsystems, Inc. 1,096,250 1,112,500 0.3
Components 1,400,000 ++Videologic Group PLC (a) 968,625 906,990 0.3
Information Systems 100,000 ++Wonderware Corp. 2,050,000 1,425,000 0.5
------------ ------------ ------
14,141,755 12,679,490 3.9
<PAGE>
Demographic Trends
Specialty Services 200,000 ++ADT Ltd. 1,987,000 2,075,000 0.6
Health & Fitness 307,350 CML Group Inc. 5,535,775 2,919,825 0.9
Insurance 124,400 Providian Corp. (b) 4,921,913 3,840,850 1.2
Specialty Services 100,000 Rollins, Inc. 2,508,573 2,400,000 0.7
Specialty Services 100,000 Sotheby's Holdings, Inc. (Class A) 1,228,352 1,262,500 0.4
Financial Services 50,000 SunAmerica Inc. 2,276,925 2,268,750 0.7
Leisure & Entertainment 100,000 ++Video Lottery Technologies, Inc. 1,541,885 925,000 0.3
Leisure & Entertainment 100,000 ++WMS Industries Inc. 2,696,774 1,750,000 0.6
------------ ------------ ------
22,697,197 17,441,925 5.4
Developing Foreign Economies
Multi-Industry 300,000 Grupo Carso S.A. de C.V. "A1" 1,192,885 3,084,730 1.0
Financial Services 60,100 Istituto Mobiliare Italiano S.p.A. (ADR)* 1,363,199 1,164,438 0.4
Financial Services 914,000 Manhattan Card Co. Ltd. 364,454 377,446 0.1
Telecommunications 190,000 Telefonos de Mexico, S.A. de C.V. (ADR)* 7,183,836 11,542,500 3.6
Telecommunications 90,000 Thai Telephone & Telecommunication PLC (a) 520,034 543,382 0.1
Energy 100,000 YPF S.A. (ADR)* 2,698,460 2,537,500 0.7
------------ ------------ ------
13,322,868 19,249,996 5.9
Environmental Solutions
Energy 50,000 Kenetech Corp. 895,000 800,000 0.3
Pollution Technology 250,000 ++Molten Metal Technology, Inc. 4,087,770 4,375,000 1.3
Pollution Technology 100,000 ++Purus Inc. 1,414,127 350,000 0.1
Pollution Technology 180,000 Thermo Electron Corp. 6,840,000 7,177,500 2.2
Waste Management 150,000 WMX Technologies, Inc. 3,605,880 4,368,750 1.3
------------ ------------ ------
16,842,777 17,071,250 5.2
Extended Economic Cycles
Metals 50,000 ++Bethlehem Steel Corp. 1,137,500 1,112,500 0.3
Machinery 25,000 Caterpillar, Inc. 2,695,962 2,709,375 0.8
Machinery 50,000 Deere & Co. 3,405,500 3,506,250 1.1
Chemicals 50,000 Rohm & Haas Co. 3,329,500 3,237,500 1.0
------------ ------------ ------
10,568,462 10,565,625 3.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Concept Tomorrow Shares Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Future Retailing
Specialty Retail 100,000 Authentic Fitness Corp. $ 1,556,250 $ 1,337,500 0.4%
Specialty Retail 55,700 ++Barnes & Noble, Inc. 1,517,000 1,392,500 0.4
Private Label 160,000 Cott Corp. 5,005,002 1,900,000 0.6
Specialty Retail 50,800 ++Discount Auto Parts, Inc. 1,302,423 1,149,350 0.4
Private Label 115,300 ++Nutramax Products, Inc. 1,548,900 980,050 0.3
Private Label 160,000 The Perrigo Company, Inc. 3,566,092 2,200,000 0.7
Specialty Retail 75,000 ++Variflex, Inc. 1,152,500 1,200,000 0.4
Specialty Retail 200,000 Wal-Mart Stores, Inc. 5,258,570 5,000,000 1.5
------------ ------------ ------
20,906,737 15,159,400 4.7
Global Market Expansion
Financial Services 135,000 American Express Co. 2,897,406 3,577,500 1.1
Energy 100,000 Amoco Corp. 5,665,900 5,987,500 1.9
Household Products 74,600 Colgate-Palmolive Co. 1,548,920 3,981,775 1.2
Energy 100,000 Mobil Oil Corp. 7,973,380 8,387,500 2.6
Food & Beverage 280,000 PepsiCo, Inc. 7,943,124 8,540,000 2.6
Consumer Appliances 50,000 Whirlpool Corp. 2,543,663 2,543,750 0.8
------------ ------------ ------
28,572,393 33,018,025 10.2
<PAGE>
Healthcare Cost Containment
Biotechnology 65,000 ++Chiron Corp. 3,681,187 3,477,500 1.1
Health Maintenance 100,000 ++FHP International Corp. 2,275,000 2,400,000 0.7
Pharmaceuticals 150,900 Merck & Co., Inc. 5,685,639 4,470,413 1.4
Pharmaceuticals 100,000 Pfizer, Inc. 3,038,128 6,200,000 1.9
Biotechnology 105,000 Procyte Corp. 1,391,250 984,375 0.3
Pharmaceuticals 137,200 Schering-Plough Corp. 3,180,566 8,797,950 2.7
Medical Equipment 100,000 Thermotrex Corp. 1,529,330 1,287,500 0.4
Medical Equipment 100,000 United States Surgical Corp. 6,799,013 2,225,000 0.7
------------ ------------ ------
27,580,113 29,842,738 9.2
Industrial Outsourcing
Automotive Components 50,000 Hayes Wheels International, Inc. 1,176,725 1,237,500 0.4
Specialty Services 32,400 Interim Services, Inc. 648,000 761,400 0.2
Automotive Components 210,000 Magna International, Inc. 3,191,250 8,715,000 2.7
Specialty Services 100,000 Olsten Corp. 3,190,200 3,375,000 1.0
------------ ------------ ------
8,206,175 14,088,900 4.3
Industrial Renaissance
Automobile 350,000 Chrysler Corp. 9,780,250 16,843,750 5.2
Automobile 200,000 Ford Motor Co. 4,590,380 6,350,000 1.9
Automobile 200,000 General Motors Corp. 7,896,900 10,275,000 3.2
Information Systems 200,000 International Business Machines Corp. 11,614,254 12,350,000 3.8
------------ ------------ ------
33,881,784 45,818,750 14.1
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Concept Tomorrow Shares Held Common Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Multimedia
Wireless Cable Television 55,000 ++American Telecasting, Inc. $ 990,000 $ 673,750 0.2%
Wireless Cable Television 102,000 CAI Wireless Systems, Inc. 1,172,000 1,020,000 0.3
Wireless Cable Television 75,000 ++CableMaxx, Inc. 906,875 487,500 0.2
Leisure & Entertainment 100,000 ++LodgeNet Entertainment Corp. 1,451,730 825,000 0.3
Broadcasting & Publishing 225,000 The News Corp. Ltd. (ADR)* 9,030,250 11,587,500 3.6
Wireless Cable Television 50,000 ++Preferred Entertainment, Inc. 938,500 700,000 0.2
Leisure & Entertainment 125,000 Time Warner, Inc. 3,491,400 4,640,625 1.4
Leisure & Entertainment 104,400 The Walt Disney Co. 2,734,106 4,437,000 1.3
------------ ------------ ------
20,714,861 24,371,375 7.5
Progressive Education
Education 100,000 ++Broderbund Software, Inc. 3,459,375 4,825,000 1.5
Education 175,000 ++Education Alternatives, Inc. 5,308,522 2,581,250 0.8
Education 140,000 ++Scholastic Corporation 6,019,125 6,090,000 1.9
------------ ------------ ------
14,787,022 13,496,250 4.2
Strategic Growth Opportunities
Textile & Apparel 100,000 ++Burlington Industries, Inc. 1,399,950 1,487,500 0.5
Apparel 225,000 ++Chic by H.I.S., Inc. 2,846,058 2,925,000 0.9
Financial Services 100,000 Household International Inc. 3,138,738 3,425,000 1.1
Specialty Retail 150,000 The Limited, Inc. 3,962,130 2,962,500 0.9
Apparel 150,000 Liz Claiborne, Inc. 5,454,429 3,187,500 0.9
Broadcasting & Publishing 137,900 The New York Times Co. 4,681,665 3,257,888 1.0
------------ ------------ ------
21,482,970 17,245,388 5.3
<PAGE>
Telecommunications
Telecommunications 165,000 ++ALC Communications Corp. 2,504,250 5,341,875 1.6
Components 100,000 ++ANTEC Corp. 2,292,650 2,800,000 0.9
Cellular Communications 300,000 AirTouch Communications, Inc. 5,772,230 7,800,000 2.4
Components 35,400 ++BroadBand Technologies, Inc. 637,200 893,850 0.3
Components 150,000 ++Inter-Tel, Inc. 1,383,862 1,406,250 0.4
Telecommunications 150,000 MCI Communications Corp. 3,895,310 3,393,750 1.0
Telecommunications 100,000 ++MFS Communications Co., Inc. 2,536,850 2,925,000 0.9
Paging Systems 225,000 ++Metrocall, Inc. 3,473,126 2,981,250 0.9
Paging Systems 300,000 USA Mobile Communications Holdings, Inc. 2,837,500 2,175,000 0.7
------------ ------------ ------
25,332,978 29,716,975 9.1
Total Common Stocks 279,038,092 299,766,087 92.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Short-Term Securities Cost (Note 1A) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial $10,991,000 General Electric Capital Corp., 4.20%
Paper** due 8/01/1994 $ 10,988,436 $ 10,988,436 3.4%
10,000,000 Transamerica Finance Corp., 4.37% due 8/19/1994 9,975,722 9,975,722 3.0
Total Short-Term Securities 20,964,158 20,964,158 6.4
Total Investments $300,002,250 320,730,245 98.6
============
Other Assets Less Liabilities 4,517,775 1.4
------------ ------
Net Assets $325,248,020 100.0%
============ ======
<FN>
(a)Restricted securities. The value of the Fund's investment in
restricted securities was approximately $1,450,000, representing
0.4% of net assets.
(b)Formerly Capital Holding Co.
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by
the Fund.
++Non-income producing securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended July 31, 1994
Percent of
Ten Largest Holdings Net Assets
Chrysler Corp. 5.2%
International Business Machines Corp. 3.8
The News Corp. Ltd. (ADR) 3.6
Telefonos de Mexico, S.A. de C.V. (ADR) 3.6
General Motors Corp. 3.2
Schering-Plough Corp. 2.7
Magna International, Inc. 2.7
PepsiCo, Inc. 2.6
Mobil Oil Corp. 2.6
AirTouch Communications, Inc. 2.4
Additions
ADT Ltd.
Bethlehem Steel Corp.
Caterpillar, Inc.
Deere & Co.
Kenetech Corp.
*Lehman Brothers Holdings, Inc.
Rohm & Haas Co.
Rollins, Inc.
Sun Microsystems, Inc.
*Thermolase Corp. (Rights)
Variflex, Inc.
Videologic Group PLC
Whirlpool Corp.
<PAGE>
Deletions
Amgen Inc.
Brilliance China Automotive Holdings Ltd.
Bufete Industrial S.A. (ADR)
CPC International, Inc.
Compania Cervecerias Unidas S.A. (ADR)
Ek Chor China Motorcycle Co., Ltd.
Grupo Televisa, S.A. de C.V. (GDS)
Hollywood Entertainment Corp.
Industrie Natuzzi S.p.A. (ADR)
*Lehman Brothers Holdings, Inc.
Sports & Recreation, Inc.
*Thermolase Corp. (Rights)
Valence Technology, Inc.
ValueVision International, Inc. (Class A)
Wellcome PLC (ADR)
[FN]
*Added and deleted in the same quarter.
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$300,002,250) (Note 1a) $320,730,245
Cash 69
Receivables:
Securities sold $ 19,047,708
Dividends 230,189
Capital shares sold 195,028 19,472,925
------------
Prepaid registration fees and other assets (Note 1e) 22,724
------------
Total assets 340,225,963
------------
<PAGE>
Liabilities: Payables:
Securities purchased 13,314,626
Capital shares redeemed 1,048,238
Distributor (Note 2) 250,378
Investment adviser (Note 2) 167,560 14,780,802
------------
Accrued expenses and other liabilities 197,141
------------
Total liabilities 14,977,943
------------
Net Assets: Net assets $325,248,020
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 67,312
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 2,327,905
Paid-in capital in excess of par 293,141,779
Accumulated investment loss--net (626,046)
Undistributed realized capital gains and foreign currency transactions--net 9,611,421
Unrealized appreciation on investments and foreign currency
transactions--net 20,725,649
------------
Net assets $325,248,020
============
Net Asset Class A--Based on net assets of $9,233,373 and 673,117 shares outstanding $ 13.72
Value: ============
Class B--Based on net assets of $316,014,647 and 23,279,054 shares outstanding $ 13.58
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Operations for the Six Months Ended July 31, 1994
<CAPTION>
<S> <S> <C> <C>
Investment Dividends (net of $46,115 foreign withholding tax) $ 2,041,670
Income Interest and discount earned 435,318
(Notes 1c Other income 235,361
& 1d): ------------
Total income 2,712,349
------------
Expenses: Distribution fees--Class B (Note 2) $ 1,695,239
Investment advisory fees (Note 2) 1,133,774
Transfer agent fees--Class B (Note 2) 298,290
Printing and shareholder reports 74,700
Accounting services (Note 2) 37,038
Registration fees (Note 1e) 30,249
Professional fees 28,684
Custodian fees 22,291
Directors' fees and expenses 8,043
Transfer agent fees--Class A (Note 2) 7,186
Other 2,901
------------
Total expenses 3,338,395
------------
Investment loss--net (626,046)
------------
Realized & Realized gain from:
Unrealized Investments--net 9,613,836
Gain (Loss) Foreign currency transactions--net 3,013 9,616,849
on Investments ------------
& Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net (57,421,729)
Transactions Foreign currency transactions--net 7,258 (57,414,471)
- --Net ------------ ------------
(Notes 1b, Net realized and unrealized loss on investments and foreign
1d & 3): currency transactions (47,797,622)
------------
Net Decrease in Net Assets Resulting from Operations $(48,423,668)
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
July 31, January 31,
1994 1994
Increase (Decrease) in Net Assets:
<S> <S> <C> <C>
Operations: Investment loss--net $ (626,046) $ (203,942)
Realized gain on investments and foreign currency transactions--net 9,616,849 46,285,020
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net (57,414,471) 9,227,443
------------ ------------
Net increase (decrease) in net assets resulting from operations (48,423,668) 55,308,521
------------ ------------
Distribu- Realized gain on investments--net:
tions to Class A (493,267) (1,437,834)
Shareholders Class B (16,575,755) (52,604,277)
(Note 1f): ------------ ------------
Net decrease in net assets resulting from distributions to shareholders (17,069,022) (54,042,111)
------------ ------------
Capital Share Net decrease in net assets derived from capital share transactions (16,625,275) (52,481,091)
Transactions ------------ ------------
(Note 4):
Net Assets: Total decrease in net assets (82,117,965) (51,214,681)
Beginning of period 407,365,985 458,580,666
------------ ------------
End of period* $325,248,020 $407,365,985
============ ============
<FN>
*Accumulated investment loss--net $ (626,046) $ 0
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 1994++ 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.39 $ 16.29 $ 16.84 $ 15.49 $ 15.26
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .05 .15 .25 .36 .41
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net(1) (1.97) 2.18 .49 3.74 .59
-------- -------- -------- -------- --------
Total from investment operations (1.92) 2.33 .74 4.10 1.00
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.23) (.35) (.40)
Realized gain on investments--net (.75) (2.23) (1.06) (2.40) (.37)
-------- -------- -------- -------- --------
Total dividends and distributions (.75) (2.23) (1.29) (2.75) (.77)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.72 $ 16.39 $ 16.29 $ 16.84 $ 15.49
======== ======== ======== ======== ========
Total Based on net asset value per share (11.57%)+++ 15.78% 4.79% 28.35% 6.64%
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses .91%* .88% .90% .95% .96%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net .64%* .95% 1.35% 1.81% 2.58%
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 9,233 $ 10,942 $ 11,394 $ 8,846 $ 5,478
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.12% 48.63% 40.58% 48.28% 25.57%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified
to conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the
The following per share data and ratios have been derived Six Months
from information provided in the financial statements. Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 1994++ 1994++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.30 $ 16.28 $ 16.82 $ 15.48 $ 15.24
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.03) (.01) .06 .14 .24
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net(1) (1.96) 2.17 .52 3.77 .60
-------- -------- -------- -------- --------
Total from investment operations (1.99) 2.16 .58 3.91 .84
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.06) (.17) (.23)
Realized gain on investments--net (.73) (2.14) (1.06) (2.40) (.37)
-------- -------- -------- -------- --------
Total dividends and distributions (.73) (2.14) (1.12) (2.57) (.60)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.58 $ 16.30 $ 16.28 $ 16.82 $ 15.48
======== ======== ======== ======== ========
<PAGE>
Total Based on net asset value per share (12.03%)+++ 14.60% 3.75% 26.96% 5.59%
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding distribution fees .94%* .91% .92% .98% 1.00%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.94%* 1.91% 1.92% 1.98% 2.00%
======== ======== ======== ======== ========
Investment income (loss)--net (.39%)* (.07%) .36% .83% 1.53%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $316,015 $396,424 $447,186 $476,106 $442,944
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.12% 48.63% 40.58% 48.28% 25.57%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
(1)Foreign currency transaction amounts have been reclassified to
conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Fund For Tomorrow, Inc. (the "Fund") is
registered under the Investment Company Act of 1940
as a diversified, open-end management investment com-
pany. The Fund offers both Class A and Class B Shares.
Class A Shares are sold with a front-end sales charge.
Class B Shares may be subject to a contingent deferred
sales charge. Both classes of shares have identical vot-
ing, dividend, liquidation and other rights and the same
terms and conditions, except that Class B Shares bear
certain expenses related to the distribution of such
shares and have exclusive voting rights with respect to
matters relating to such distribution expenditures.
The following is a summary of significant accounting
policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Portfolio securities which
are traded on stock exchanges are valued at their last
sale prices as of the close of business on the day the
securities are being valued or, lacking any sales on that
day, at the last available bid price. Securities traded in
the over-the-counter market are valued at the last bid
prices quoted by brokers that make markets in the
securities at the close of trading on the New York Stock
Exchange. Portfolio securities which are traded both in
the over-the-counter market and on a stock exchange
are valued based upon the prices or quotes obtained
from the broadest and most representative market.
Securities and other assets for which market quotations
are not readily available are valued at fair value as
determined in good faith by or under the direction
of the Board of Directors of the Fund. Short-term
securities are valued at amortized cost which approxi-
mates market.
(b) Foreign currency transactions--Transactions denom-
inated in foreign currencies are recorded at the exchange
rate prevailing when recognized. Assets and liabilities
denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency
transactions are the result of settling (realized) or valu-
ing (unrealized) such transactions expressed in foreign
currencies into US dollars. Realized and unrealized
gains or losses from investments include the effects of
foreign exchange rates on investments.
The Fund is authorized to enter into forward foreign
exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are
not entered on the Fund's records. However, the effect
on operations is recorded from the date the Fund enters
into such contracts. Premium or discount is amortized
over the life of the contracts.
(c) Income taxes--It is the Fund's policy to comply
with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to
distribute substantially all of its taxable income to its
shareholders. Therefore, no Federal income tax provi-
sion is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends
and capital gains at various rates.
<PAGE>
(d) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered into (the trade dates). Dividend
income is recorded on the ex-dividend date except that
if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the funds
are informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the
accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees
are charged to expense as the related shares are issued.
(f) Dividends and distributions to shareholders--
Dividends and distributions paid by the Fund are
recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory
Agreement with Merrill Lynch Asset Management, L.P.
("MLAM"). The general partner of MLAM is Princeton
Services, Inc., an indirect wholly-owned subsidiary of
Merrill Lynch and Co., Inc. ("ML & Co.") The limited
partners are ML & Co. and Merrill Lynch Investment
Management, Inc. ("MLIM"), which is also an indirect
wholly-owned subsidiary of ML & Co. The Fund has
also entered into Distribution Agreements and a
Distribution Plan with Merrill Lynch Funds Distributor,
Inc. ("MLFD" or "Distributor"), a wholly-owned subsidi-
ary of MLIM.
<PAGE>
MLAM is responsible for the management of the Fund's
portfolio and provides the necessary personnel, facili-
ties, equipment and certain other services necessary to
the operations of the Fund. For such services, the Fund
pays a monthly fee based upon the average daily value
of the Fund's net assets at the following annual rates:
0.65% of the average daily net assets not exceeding
$750 million; 0.60% of the average daily net assets
exceeding $750 million but not exceeding $1 billion;
and 0.55% of the average daily net assets exceeding
$1 billion. The Investment Advisory Agreement obli-
gates MLAM to reimburse the Fund to the extent the
Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordi-
nary items) exceed 2.5% of the Fund's first $30 million
of average daily net assets, 2.0% of the next $70 million
of average daily net assets, and 1.5% of the average daily
net assets in excess thereof. No fee payment will be
made to the Investment Adviser which would result in
Fund expenses exceeding on a cumulative annualized
basis the most restrictive applicable expense limitation
in effect at the time of such payment.
Pursuant to a distribution plan (the "Distribution Plan")
adopted by the Fund in accordance with Rule 12b-1
under the Investment Company Act of 1940, the Fund
pays the Distributor an ongoing account maintenance
fee and distribution fee, which are accrued daily and
paid monthly at the annual rate of 0.25% and 0.75%,
respectively, of the average daily net assets of the
Class B Shares of the Fund. This fee is to compensate
the Distributor for services it provides and the expenses
borne by the Distributor under the Distribution
Agreement. As authorized by the Plan, the Distributor
has entered into an agreement with Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), which
provides for the compensation of MLPF&S for providing
distribution-related services to the Fund.
During the six months ended July 31, 1994, MLFD earned
underwriting discounts of $456, and MLPF&S earned
dealer concessions of $5,895 on sales of the Fund's
Class A Shares.
MLPF&S also received contingent deferred sales report-
ing charges of $53,188 relating to transactions in Class
B Shares and $10,500 in commissions on the execution
of portfolio security transactions for the Fund during
the period.
<PAGE>
Financial Data Services, Inc. ("FDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM
at cost.
Certain officers and/or directors of the Fund are officers
and/or directors of MLAM, MLIM, MLPF&S, FDS, MLFD,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the six months ended July 31, 1994
were $86,801,212 and $115,331,147, respectively.
Net realized and unrealized gains (losses) as of July 31,
1994 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $9,613,875 $ 20,727,995
Short-term investments (39) --
Foreign currency transactions 3,013 (2,346)
---------- ------------
Total $9,616,849 $ 20,725,649
========== ============
As of July 31, 1994, net unrealized appreciation for
Federal income tax purposes aggregated $20,727,995, of
which $53,440,147 related to appreciated securities and
$32,712,152 related to depreciated securities. The aggre-
gate cost of investments at July 31, 1994 for Federal
income tax purposes was $300,002,250.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Capital Share Transactions:
Net decrease in net assets derived from capital share
transactions was $16,625,275 and $52,481,091 for the
six months ended July 31, 1994 and the year ended
January 31, 1994, respectively.
Transactions in capital shares for Class A and Class B
Shares were as follows:
<PAGE>
Class A Shares for the Six Months Dollar
Ended July 31, 1994 Shares Amount
Shares sold 68,553 $ 1,038,019
Shares issued to shareholders
in reinvestment of
distributions 33,364 441,736
----------- ------------
Total issued 101,917 1,479,755
Shares redeemed (96,210) (1,404,411)
----------- ------------
Net increase 5,707 $ 75,344
=========== ============
Class A Shares for the Year Dollar
Ended January 31, 1994 Shares Amount
Shares sold 188,941 $ 3,088,274
Shares issued to shareholders
in reinvestment of
distributions 82,693 1,266,935
----------- ------------
Total issued 271,634 4,355,209
Shares redeemed (303,511) (4,894,524)
----------- ------------
Net decrease (31,877) $ (539,315)
=========== ============
<PAGE>
Class B Shares for the Six Months Dollar
Ended July 31, 1994 Shares Amount
Shares sold 607,510 $ 9,146,215
Shares issued to shareholders
in reinvestment of
distributions 1,105,991 14,499,536
----------- ------------
Total issued 1,713,501 23,645,751
Shares redeemed (2,757,433) (40,346,370)
----------- ------------
Net decrease (1,043,932) $(16,700,619)
=========== ============
Class B Shares for the Year Dollar
Ended January 31, 1994 Shares Amount
Shares sold 2,491,455 $ 40,734,290
Shares issued to shareholders
in reinvestment of
distributions 3,009,988 45,992,774
----------- ------------
Total issued 5,501,443 86,727,064
Shares redeemed (8,646,525) (138,668,840)
----------- ------------
Net decrease (3,145,082) $(51,941,776)
=========== ============
5. Loaned Securities:
At July 31, 1994, the Fund held US Treasury Notes
having an aggregate value of approximately $16,991,000
as collateral for portfolio securities loaned having a
market value of approximately $15,713,000.
APPENDIX: GRAPHIC AND IMAGE MATERIAL.
Item 1:
Pie Graph depicting Concept Sectors As a Percentage of Net Assets
As of July 31, 1994:
Computer Technologies 3.9%
Demographic Trends 5.4%
Developing Foreign Economies 5.9%
Environmental Solutions 5.2%
Extended Economic Cycles 3.2%
Future Retailing 4.7%
Global Market Expansion 10.2%
Healthcare Cost Containment 9.2%
Industrial Outsourcing 4.3%
Industrial Renaissance 14.1%
Multimedia 7.5%
Progressive Education 4.2%
Strategic Growth Opportunities 5.3%
Telecommunications 9.1%
Cash 7.8%*
[FN]
*Net of other assets less liabilities.
<PAGE>
Bar Graph depicting Growth Stock Characteristics as a % of Equity
Holdings:
Emerging Growth 6.1% 18.4%
Established Growth 20.0% 18.5%
Stable Growth 14.8% 22.2%
