MERRILL LYNCH
FUND FOR
TOMORROW, INC.
FUND LOGO
Annual Report
January 31, 1995
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.
<PAGE>
Concept Sectors
Pie graph depicting Concept Sectors As a Percentage of Net Assets
As of January 31, 1995:
Computer Technologies 4.2%
Demographic Trends 3.5%
Developing Foreign Economies 3.6%
Environmental Solutions 5.3%
Extended Economic Cycles 6.3%
Future Retailing 4.7%
Global Market Expansion 8.7%
Healthcare Cost Containment 10.6%
Industrial Outsourcing 4.2%
Industrial Renaissance 12.3%
Multimedia 7.3%
Progressive Education 2.8%
Strategic Growth Opportunities 1.4%
Telecommunications 14.4%
Cash 10.7%
[FN]
*Net of other assets less liabilities.
Growth Stock Characteristics As of January 31, 1995
Bar graph depicting Growth Stock Characteristics as a % of Equity
Holdings as of January 31, 1995:
Emerging Growth 8.0% 17.7%
Established growth 21.5% 16.6%
Stable growth 16.1% 20.1%
DEAR SHAREHOLDER
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board
and the turmoil of the Mexican currency crisis all exerted negative
influences on the US financial markets during the January quarter.
On the positive side, increasing signs that the US economy may be
losing momentum suggested that most of the interest rate increases
for this economic cycle may be behind us. As a result of these
economic crosscurrents, the US stock and bond markets continued to
be volatile during the period.
<PAGE>
The manufacturing sector proved to be the driving force behind the
US economy through the final quarter of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries, but households are nonetheless
spending more than saving, as the personal savings rate fell to an
all-time annual low in 1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether further increases
in short-term interest rates are likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw materials and
incipient inflationary pressures, 1994's inflation results were as
positive as those in 1993, creating the best sustained inflation
performance in 30 years. However, it is not likely that such
positive inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. Legislative progress,
combined with continued indications of moderate and sustainable
levels of economic growth, would be positive for the US capital
markets. However, the lagged effects of higher interest rates could
slow the economy sharply and with it, the growth of corporate
profits.
Portfolio Matters
During Merrill Lynch Fund For Tomorrow, Inc.'s fiscal fourth
quarter, the broad stock market indexes showed little change from
earlier levels. However, there was a considerable contrast between
the broadly based Standard & Poor's 500 Index and the smaller-
capitalization stocks of the NASDAQ Industrial Index. A disparity in
performance between these two barometers of stock market activity
often is associated with changes in investor sentiment. Indeed, our
observation of individual sector performance reveals a clear "flight
to safety" by investors during the past three-month period. We
attribute much of this defensive stock market behavior to mounting
concerns that the economy may be nearing the peak of its growth
cycle coupled with expectations that the Federal Reserve Board will
continue to raise interest rates.
<PAGE>
As a result of this cautious outlook, there was significant
underperformance among over-the-counter stocks, economically
sensitive industries and small-capitalization companies. Typical of
these underperforming groups were housing and automobile-related
companies along with capital goods and some retail sectors.
Conversely, the more stable industries, and defensive stocks in
general, tended to outperform the stock market as a whole. Examples
of these sectors were food and household products, drug companies,
utilities and consumer services. The widely diverse technology
industries, although generally driven by a strong economic outlook,
did not show any significant weakness, which we believe was because
of their dynamic longer-term growth potential. Among overseas stock
markets, most investments in emerging economies suffered more than
those in the US stock market, also in response to uneasiness about
future economic growth. Compounding these concerns were the economic
problems which surfaced in Mexico and suddenly escalated into the
devaluation of the peso.
Upon entering the final quarter of the Fund's fiscal year, we set
the Fund's investment strategy on a generally favorable investment
outlook. Accordingly, the Fund remained relatively fully invested
throughout most of the period. New investment activities continued
to focus on smaller companies with outstanding long-term growth
potential. As a result, two-thirds of the new stocks added to the
portfolio are essentially in this category. Changes in our "growth
stock characteristics" chart on page 1 of this report to
shareholders show the emerging growth end of the continuum higher,
at 8.0%, and the stable growth sector lower, at 20.1% of total
holdings. However, because we believe that near-term market forces
tended to favor stable growth for reasons mentioned earlier, the
chart still shows a small bias toward investments with greater
growth stability. In terms of our concept sectors, there were some
modest changes. Most notable of these were decreases in weightings
within the global market expansion and industrial renaissance
concepts and an increase in the telecommunications concept
weighting.
The Fund's investment performance during the January quarter seemed
to follow a pattern similar to that of the US equity markets as a
whole. Many of the smaller-capitalization stocks held in the
portfolio experienced weakness despite ongoing favorable
fundamentals. Typical of these developments were wireless cable-TV
and private-label consumer product companies. Also, our holdings in
autos, capital goods and chemicals were under pressure as was our
relatively small exposure in Mexico. However, we were pleased to see
some areas of excellent price performance, with healthcare as a
whole leading the way. Strong individual gains were registered by
The Walt Disney Co., Kenetech Corp., Promus Companies, Inc. and
Wonderware Corp.
<PAGE>
Additions to the portfolio during the quarter were quite diverse.
Within the broad area of computer technology, we added VLSI
Technology, Inc. The Fund's participation in telecommunications was
supplemented by Motorola, Inc., while we added Champion Technology
Holdings Ltd., a paging company in the Far East, to developing
foreign economies. Global market expansion beneficiaries included
ASEA AB, Philips Electronics N. V., Kimberly-Clark Corporation and
Royal Plastic Group Limited. Three companies with retailing formats
of the future included Daisytek International Corporation and
OfficeMax, Inc. in office and computer supplies, and Cannondale
Corp. which is in the high-end bicycle market. We added Westcott
Communications, Inc., a software company, to our progressive
education concept, Mylan Laboratories Inc. joined the Fund's
healthcare cost containment holdings and Carnival Corporation fit
well with our demographic trends concept sector. Finally, we added
Wendy's International, Inc. to our strategic growth opportunities
group based on the prospects for accelerating earnings. For the most
part, sales during the quarter were guided by a combination of
profit-taking and eliminating positions which no longer met our
longer-term growth objectives. In addition, however, late in the
period part of our investment strategy included an effort to
increase cash reserves as a shorter-term tactic in the face of stock
market uncertainty, which also allows us to better take advantage of
future buying opportunities. Accordingly, at the end of the quarter,
the Fund's cash reserves were at 8.0% of net assets versus 5.8% at
the end of the prior quarter.
Fiscal Year In Review
As we close out the 1994 fiscal year, Merrill Lynch Fund For
Tomorrow, Inc. has completed its transition to a concept-oriented,
long-term growth investment strategy. The broader stock market
averages showed a minimal decline during the past 12 months while
the smaller stock indexes had a more significant drop. In
retrospect, this period may have been ideally suited to our program
of restructuring the portfolio for longer-term appreciation
objectives by enabling us to position new investments at attractive
valuations.
Throughout the period, we endeavored to identify the major trends in
global markets, corporate developments and new products and
technologies which currently make up the 14 investment concepts
within the Fund. We also attempted to reshape the Fund's investment
profile with a gradual shift toward companies which are relatively
early in their growth cycles. However, despite the potential longer-
term benefits of the Fund's restructuring, stock market conditions
throughout most of fiscal 1994 did not especially favor our concept
investment strategy. While the stock markets in general suffered
from economic uncertainty, those investments which typically require
a more patient time horizon suffered most. Concept, or thematic,
investing inherently needs a longer period of time to produce
superior investment returns.
<PAGE>
Essentially, there were four areas of the Fund's investments which
have strong long-term fundamental prospects, but did not fare well
in the recent short-term oriented stock market environment. Among
these, the automotive, capital goods and basic industry sectors
continue to produce outstanding earnings which could last another
two years or more. Also, telecommunications is clearly a growth
industry of the 1990s, but rapid technological change reduces near-
term visibility. We believe the stock market will begin to reflect
the underlying value of these longer-term investments in 1995.
Another area which was under pricing pressure last year was our
small-capitalization companies. This was clearly apparent by the
10.5% decline in the unmanaged NASDAQ Industrial Index.
Overall, we believe the fiscal 1994 transition period has
successfully positioned the Fund for the future and the outlook for
attaining its long-term growth objectives is positive. Going
forward, our mission is to both monitor our existing investment
concepts and to find new concepts with attractive investment
opportunities. We anticipate that in most cases, these concepts and
the Fund's individual stock participations will prove rewarding and
will allow us to build positions in those areas. In other cases,
some concepts will have met our objectives and will be gradually
phased out over time. And in those concepts that fail to show
continued merit, we will endeavor to replace them with new concept
opportunities. It is this continuous process of identifying the
important investment concepts of the future and investing in their
primary beneficiaries that gives us a high degree of confidence for
meeting our long-term investment objectives.
In Conclusion
We appreciate your ongoing interest in Merrill Lynch Fund For
Tomorrow, Inc., and we look forward to assisting you with your
financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent P. Dileo)
Vincent P. Dileo
Vice President and Portfolio Manager
<PAGE>
March 9, 1995
Proxy Results
During the six-month period ended January 31, 1995, Merrill Lynch
Fund For Tomorrow, Inc. shareholders voted on the following
proposals. Proposals 1, 2 and 4 were approved at a special
shareholders' meeting on September 26, 1994. Proposal 3 was passed
at a special shareholders' meeting on January 31, 1995. The
description of each proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Withhold Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Ronald W. Forbes 22,060,600 574,080
Cynthia A. Montgomery 22,061,627 573,053
Charles C. Reilly 22,057,058 577,622
Kevin A. Ryan 22,061,885 572,795
Richard R. West 22,061,196 573,484
Arthur Zeikel 22,045,808 588,872
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent auditors. 21,737,716 296,439 600,525
3. To approve certain changes to the Fund's fundamental
investment restrictions. 10,723,945 591,179 1,040,801
4. To amend the Fund's articles of incorporation to implement the
Merrill Lynch Select Pricing SM System. 19,488,721 1,454,986 1,690,973
</TABLE>
<PAGE>
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 8 years.
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Performance Summary," "Total Return Based on a
$10,000 Investment," "Recent Performance Results" and "Average
Annual Total Return" tables below and on pages 6 and 7. Data for
Class C and Class D Shares are also presented in the "Recent
Performance Results" and "Aggregate Total Return" tables below and
on page 6.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended January 31, 1995
and for Class C and Class D Shares for the since inception and 3-
month periods ended January 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should 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. 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.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
ML Fund For Tomorrow, Inc. Class A Shares* $13.55 $14.38 $16.39 -12.88%(1) - 4.65%(2)
ML Fund For Tomorrow, Inc. Class B Shares* 13.33 14.19 16.30 -13.77(1) - 4.93(2)
ML Fund For Tomorrow, Inc. Class C Shares* 13.28 14.19 14.08 - 4.54(2) - 5.28(2)
ML Fund For Tomorrow, Inc. Class D Shares* 13.54 14.37 14.26 - 3.92(2) - 4.66(2)
Standard & Poor's 500 Index** 470.42 472.35 481.61 - 2.32 - 0.41
NASDAQ Industrial Index** 749.87 787.79 837.89 -10.50 - 4.81
ML Fund For Tomorrow, Inc. Class A Shares--Total Return* -11.23(3) - 4.23(4)
ML Fund For Tomorrow, Inc. Class B Shares--Total Return* -12.22(5) - 4.50(6)
ML Fund For Tomorrow, Inc. Class C Shares--Total Return* - 4.12(6) - 4.86(6)
ML Fund For Tomorrow, Inc. Class D Shares--Total Return* - 3.50(6) - 4.24(6)
Standard & Poor's 500 Index--Total Return** + 0.51 + 0.31
<FN>
*Investment results do not reflect sales charges; results shown
would be lower if a sales charge was included.
**An unmanaged broad-based Index comprised of common stocks. Total
investment returns for unmanaged indexes are based on estimates.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.705 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.157 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.258 per share ordinary
income dividends and $0.705 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.059 per share ordinary
income dividends and $0.157 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.243 per share ordinary
income dividends and $0.705 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.059 per share ordinary
income dividends and $0.157 per share capital gains distributions.
</TABLE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
<PAGE>
10/26/88** 1/95
ML Fund for Tomorrow, Inc.++ $9,475 $16,094
S&P 500 Index++++ $10,000 $20,354
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
1/85 1/95
ML Fund for Tomorrow, Inc.++
Class B Shares* $10,000 $25,214
S&P 500 Index++++ $10,007 $36,624
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Fund For Tomorrow, Inc. invests in a quality-oriented portfolio
of securities of companies whose products and services respond to
the changing needs of consumers and thus are believed by the Fund's
management to represent attractive investment opportunities. The
Fund invests primarily in common stocks but may invest in
convertible securities, preferred stocks and bonds.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 -7.47% -12.32%
Five Years Ended 12/31/94 +6.12 + 4.98
Inception (10/26/88)
through 12/31/94 +9.09 + 8.14
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -8.45% -11.87%
Five Years Ended 12/31/94 + 5.01 + 5.01
Ten Years Ended 12/31/94 +10.67 +10.67
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 12/31/94 -3.32% -4.27%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -2.71% -7.82%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <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
1994 15.85 13.66 0.705 0.258 - 7.47
1/1/95--1/31/95 13.66 13.55 -- -- - 0.81
------ ------
Total $8.380 Total $2.675
Cumulative total return as of 1/31/95: +69.86%**
<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>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
<S> <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
1994 15.77 13.45 0.705 0.243 - 8.45
1/1/95--1/31/95 13.45 13.33 -- -- - 0.89
------- ------
Total $10.235 Total $2.458
Cumulative total return as of 1/31/95: +203.40%**
<PAGE>
<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>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Concept Tomorrow Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Computer Technologies
Electronics 50,000 American Power Conversion Corp. $ 918,750 $ 768,750 0.3%
Personal Computers 100,000 Apple Computer, Inc. 4,868,130 4,037,500 1.4
Components 140,000 Creative Technology, Ltd. (Ordinary) 1,965,000 1,645,000 0.6
Information Systems 50,000 ++Sun Microsystems, Inc. 1,096,250 1,625,000 0.6
Semiconductor 100,000 ++VLSI Technology, Inc. 1,160,000 1,250,000 0.4
Components 1,400,000 ++Videologic Group PLC (b) 971,040 1,083,880 0.4
Information Systems 50,000 ++Wonderware Corp. 1,025,000 1,437,500 0.5
------------ ------------ ------
12,004,170 11,847,630 4.2
Demographic Trends
Health & Fitness 307,350 CML Group Inc. 5,535,775 3,265,594 1.1
Leisure & Entertainment 50,000 Carnival Corp., (Class A) 1,055,190 1,050,000 0.4
Leisure & Entertainment 100,000 Mirage Resorts, Inc. 2,025,375 2,237,500 0.8
Leisure & Entertainment 50,000 The Promus Companies, Inc. 1,724,875 1,700,000 0.6
Leisure & Entertainment 100,000 ++WMS Industries Inc. 2,696,774 1,787,500 0.6
------------ ------------ ------
13,037,989 10,040,594 3.5
Developing Foreign Economies
Telecommunications 3,000,000 Champion Technology Holdings
Ltd. (b) 997,434 558,500 0.2
Multi-Industry 300,000 Grupo Carso, S.A. de C.V. "A1" 1,192,885 1,747,826 0.6
Financial Services 60,100 Istituto Mobiliare Italiano
S.p.A. (ADR)* 1,363,199 1,179,462 0.4
Telecommunications 190,000 Telefonos de Mexico, S.A. de
C.V. (ADR)* 7,183,836 6,721,250 2.4
------------ ------------ ------
10,737,354 10,207,038 3.6
<PAGE>
Environmental Solutions
Energy 178,000 Kenetech Corp. 2,589,357 2,803,500 1.0
Pollution Technology 250,000 ++Molten Metal Technology, Inc. 4,087,770 4,343,750 1.5
Pollution Technology 7,200 ++Thermo Ecotek (Rights)(a) 4,500 900 0.0
Pollution Technology 180,000 Thermo Electron Corp. 6,840,000 8,032,500 2.8
------------ ------------ ------
13,521,627 15,180,650 5.3
Extended Economic Cycles
Metals 50,000 ++Bethlehem Steel Corp. 1,137,500 781,250 0.3
Machinery 50,000 Caterpillar, Inc. 2,695,963 2,575,000 0.9
Machinery 50,000 Deere & Co. 3,405,500 3,562,500 1.3
Chemicals 50,000 Eastman Chemical Co. 2,679,687 2,487,500 0.9
Chemicals 100,000 Imperial Chemical Industries PLC
(ADR)* 5,251,425 4,662,500 1.6
Chemicals 50,000 Lyondell Petrochemical Co. 1,605,311 1,106,250 0.4
Chemicals 50,000 Rohm & Haas Co. 3,329,500 2,712,500 0.9
------------ ------------ ------
20,104,886 17,887,500 6.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Concept Tomorrow Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Future Retailing
Specialty Retail 100,000 Authentic Fitness Corp. $ 1,556,250 $ 1,325,000 0.5%
Specialty Retail 19,500 ++Cannondale Corp. 253,500 234,000 0.1
Private Label 160,000 Cott Corp. 5,005,002 1,400,000 0.5
Specialty Retail 30,000 ++Daisytek International Corp. 450,000 495,000 0.2
Private Label 65,300 ++Nutramax Products, Inc. 898,900 571,375 0.2
Specialty Retail 88,400 ++OfficeMax, Inc. 1,679,600 2,298,400 0.8
Private Label 100,000 The Perrigo Company, Inc. 2,235,781 1,287,500 0.4
Specialty Retail 75,000 ++Variflex, Inc. 1,152,500 1,106,250 0.4
Specialty Retail 200,000 Wal-Mart Stores, Inc. 5,258,570 4,600,000 1.6
------------ ------------ ------
18,490,103 13,317,525 4.7
Global Market Expansion
Power Systems 50,000 ++ASEA AB 3,667,955 3,664,517 1.3
Household Products 74,600 Colgate-Palmolive Co. 1,548,920 4,690,475 1.6
Household Products 50,000 Kimberly-Clark Corp. 2,419,312 2,406,250 0.8
Food & Beverage 180,000 PepsiCo, Inc. 6,356,632 6,637,500 2.3
Electronics 100,000 ++Philips Electronics N.V. (ADR)* 3,231,000 3,150,000 1.1
Building Materials 250,000 ++Royal Plastic Group Limited (b) 2,049,180 l,910,636 0.7
Consumer Appliances 50,000 Whirlpool Corp. 2,543,663 2,493,750 0.9
------------ ------------ ------
21,816,662 24,953,128 8.7
<PAGE>
Healthcare Cost Containment
Biotechnology 40,136 ++Chiron Corp. 2,272,701 2,739,282 1.0
Pharmaceuticals 150,900 Merck & Co., Inc. 5,685,639 6,073,725 2.1
Generic Drugs 100,000 Mylan Labratories Inc. 2,757,780 2,800,000 1.0
Pharmaceuticals 50,000 Pfizer, Inc. 1,517,486 4,087,500 1.4
Pharmaceuticals 137,200 Schering-Plough Corp. 3,180,566 10,770,200 3.8
Medical Equipment 100,000 Thermotrex Corp. 1,529,330 1,325,000 0.5
Medical Equipment 100,000 United States Surgical Corp. 6,799,013 2,325,000 0.8
------------ ------------ ------
23,742,515 30,120,707 10.6
Industrial Outsourcing
Specialty Services 82,400 Interim Services, Inc. 1,778,775 1,926,100 0.7
Automotive Components 185,000 Magna International, Inc. 2,968,125 6,660,000 2.3
Specialty Services 100,000 Olsten Corp. 3,190,200 3,312,500 1.2
------------ ------------ ------
7,937,100 11,898,600 4.2
Industrial Renaissance
Automotive 285,600 Chrysler Corp. 8,522,582 12,852,000 4.5
Automotive 200,000 Ford Motor Co. 4,590,380 5,050,000 1.8
Automotive 200,000 General Motors Corp. 7,896,900 7,750,000 2.7
Information Systems 130,000 International Business Machines
Corp. 7,445,257 9,376,250 3.3
------------ ------------ ------
28,455,119 35,028,250 12.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Concept Tomorrow Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Multimedia
Wireless Cable Television 55,000 ++American Telecasting, Inc. $ 990,000 $ 605,000 0.2%
Wireless Cable Television 102,000 CAI Wireless Systems, Inc. 1,172,000 994,500 0.3
Cable/Telephone 75,000 Comcast UK Cable Partners, Ltd. 1,125,000 1,171,875 0.4
Broadcasting & Publishing 450,000 The News Corp. Ltd. (ADR)* 6,907,690 6,975,000 2.5
Broadcasting & Publishing 225,000 The News Corp. Ltd. (Conv. Pfd.)
(ADR)* 2,122,560 3,206,250 1.1
Wireless Cable Television 50,000 ++Preferred Entertainment, Inc. 938,500 612,500 0.2
Entertainment 125,000 Time Warner, Inc. 3,491,400 4,500,000 1.6
Leisure & Entertainment 54,400 The Walt Disney Co. 1,424,668 2,767,600 1.0
------------ ------------ ------
18,171,818 20,832,725 7.3
<PAGE>
Progressive Education
Education Services 175,000 ++Education Alternatives, Inc. 5,308,522 2,843,750 1.0
Education Products 90,000 ++Scholastic Corporation 3,539,749 4,477,500 1.6
Education Products 42,500 ++Westcott Communications, Inc. 627,580 600,312 0.2
------------ ------------ ------
9,475,851 7,921,562 2.8
Strategic Growth Opportunities
Apparel 225,000 ++Chic by H.I.S., Inc. 2,846,059 2,418,750 0.8
Restaurant 100,000 Wendy's International, Inc. 1,642,712 1,612,500 0.6
------------ ------------ ------
4,488,771 4,031,250 1.4
Telecommunications
Telecommunications 140,700 ++ALC Communications Corp. 2,157,975 4,080,300 1.4
Components 150,000 ++ANTEC Corp. 3,557,150 2,512,500 0.9
Cellular Communications 200,000 AirTouch Communications, Inc. 4,600,000 5,500,000 1.9
Components 150,000 ++Inter-Tel, Inc. 1,383,862 1,612,500 0.6
Telecommunications 150,000 MCI Communications Corp. 3,895,310 2,737,500 1.0
Telecommunications 100,000 ++MFS Communications Co., Inc. 2,536,850 3,800,000 1.3
Paging Systems 225,000 ++Metrocall, Inc. 3,473,127 3,375,000 1.2
Components 50,000 Motorola, Inc. 2,925,000 2,956,250 1.0
Components 150,000 Nokia Corp. AB (Conv. Pfd.) (ADR)* 9,756,375 10,968,750 3.9
Paging Systems 300,000 USA Mobile Communications
Holdings, Inc. 2,837,500 3,525,000 1.2
------------ ------------ ------
37,123,149 41,067,800 14.4
Total Stocks 239,107,114 254,334,959 89.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Value Percent of
Face Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial Paper** $ 12,000,000 AMRO North American Finance,
5.80% due 2/23/1995 $ 11,957,467 $ 11,957,467 4.2%
5,985,000 General Electric Capital Corp.,
5.80% due 2/01/1995 5,985,000 5,985,000 2.1
<PAGE>
US Government & 5,000,000 Federal National Mortgage
Agency Obligations** Association, 5.71% due 3/08/1995 4,972,243 4,972,243 1.7
Total Short-Term Securities 22,914,710 22,914,710 8.0
Total Investments $262,021,824 277,249,669 97.3
============
Other Assets Less Liabilities 7,628,665 2.7
------------ ------
Net Assets $284,878,334 100.0%
============ ======
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
++Non-income producing security.
(a)The rights may be exercised until 2/21/1995.
(b)Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $3,553,000,
representing 1.25% of net assets.
Acquisition Value
Issue Dates Cost (Note 1a)
Champion Technology
Holdings Ltd. 11/01/1994--11/11/1994 $ 997,434 $ 558,500
Royal Plastic
Group Limited 11/23/1994 2,049,180 1,910,636
Videologic Group PLC 7/01/1994 971,040 1,083,880
Total $4,017,654 $3,553,016
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1995
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$262,021,824) (Note 1a) $277,249,669
Receivables:
Securities sold $ 14,799,647
Dividends 289,260
Capital shares sold 122,503 15,211,410
------------
Prepaid registration fees and other assets (Note 1f) 31,345
------------
Total assets 292,492,424
------------
Liabilities: Payables:
Securities purchased 5,816,670
Capital shares redeemed 997,339
Investment adviser (Note 2) 166,016
Distributor (Note 2) 143,699 7,123,724
------------
Accrued expenses and other liabilities 490,366
------------
Total liabilities 7,614,090
------------
Net Assets: Net assets $284,878,334
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 63,966
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 893,952
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 601
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 1,159,393
Paid-in capital in excess of par 257,004,879
Accumulated investment loss--net (512,355)
Undistributed realized capital gains on investments and
foreign currency transactions--net 11,040,176
Unrealized appreciation on investments and foreign currency
transactions--net 15,227,722
------------
Net assets $284,878,334
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $8,665,188 and 639,660 shares
outstanding $ 13.55
============
Class B--Based on net assets of $119,186,282 and 8,939,516 shares
outstanding $ 13.33
============
Class C--Based on net assets of $79,868 and 6,013 shares outstanding $ 13.28
============
Class D--Based on net assets of $156,946,996 and 11,593,928 shares
outstanding $ 13.54
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended January 31, 1995
<CAPTION>
<S> <S> <C> <C>
Investment Dividends (net of $59,292 foreign withholding tax) $ 4,101,437
Income Interest and discount earned 832,897
(Notes 1d & 1e): Other income 304,376
------------
Total income 5,238,710
------------
Expenses: Distribution fees--Class B (Note 2) $ 2,927,385
Investment advisory fees (Note 2) 2,169,115
Transfer agent fees--Class B (Note 2) 626,543
Printing and shareholder reports 183,061
Transfer agent fees--Class D (Note 2) 96,585
Account maintenance fees--Class D (Note 2) 78,494
Professional fees 70,341
Accounting services (Note 2) 69,693
Registration fees (Note 1f) 62,585
Custodian fees 42,904
Directors' fees and expenses 20,420
Transfer agent fees--Class A (Note 2) 18,305
Distribution fees--Class C (Note 2) 93
Transfer agent fees--Class C (Note 2) 35
Other 3,585
------------
Total expenses 6,369,144
------------
Investment loss--net (1,130,434)
------------
<PAGE>
Realized & Realized gain (loss) on:
Unrealized Gain Investments--net 16,365,222
(Loss) on Foreign currency transactions--net (31,963) 16,333,259
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions Investments--net (62,921,879)
--Net (Notes Foreign currency transactions--net 9,481 (62,912,398)
1b, 1c, 1e & 3): ------------ ------------
Net realized and unrealized loss on investments and
foreign currency transactions (46,579,139)
------------
Net Decrease in Net Assets Resulting from Operations $(47,709,573)
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
January 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment loss--net $ (1,130,434) $ (203,942)
Realized gain on investments and foreign currency trans-
actions--net 16,333,259 46,285,020
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (62,912,398) 9,227,443
------------ ------------
Net increase (decrease) in net assets resulting from operations (47,709,573) 55,308,521
------------ ------------
Distributions to Realized gain on investments--net:
Shareholders Class A (629,067) (1,437,834)
(Note 1g): Class B (18,732,811) (52,604,277)
Class C (311) --
Class D (2,376,409) --
------------ ------------
Net decrease in net assets resulting from distributions to
shareholders (21,738,598) (54,042,111)
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (53,039,480) (52,481,091)
(Note 4): ------------ ------------
<PAGE>
Net Assets: Total decrease in net assets (122,487,651) (51,214,681)
Beginning of year 407,365,985 458,580,666
------------ ------------
End of year $284,878,334 $407,365,985
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 16.39 $ 16.29 $ 16.84 $ 15.49 $ 15.26
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .09 .15 .25 .36 .41
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (1.97) 2.18 .49 3.74 .59
-------- -------- -------- -------- --------
Total from investment operations (1.88) 2.33 .74 4.10 1.00
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.23) (.35) (.40)
Realized gain on investments--net (.96) (2.23) (1.06) (2.40) (.37)
-------- -------- -------- -------- --------
Total dividends and distributions (.96) (2.23) (1.29) (2.75) (.77)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.55 $ 16.39 $ 16.29 $ 16.84 $ 15.49
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (11.23%) 15.78% 4.79% 28.35% 6.64%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses .98% .88% .90% .95% 96%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .59% .95% 1.35% 1.81% 2.58%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 8,665 $ 10,942 $ 11,394 $ 8,846 $ 5,478
Data: ======== ======== ======== ======== ========
Portfolio turnover 45.86% 48.63% 40.58% 48.28% 25.57%
======== ======== ======== ======== ========
<PAGE>
<FN>
*Total investment return excludes the effect of sales loads.
++Based on average shares outstanding during the year.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 16.30 $ 16.28 $ 16.82 $ 15.48 $ 15.24
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.06) (.01) .06 .14 .24
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (1.96) 2.17 .52 3.77 .60
-------- -------- -------- -------- --------
Total from investment operations (2.02) 2.16 .58 3.91 .84
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.06) (.17) (.23)
Realized gain on investments--net (.95) (2.14) (1.06) (2.40) (.37)
-------- -------- -------- -------- --------
Total dividends and distributions (.95) (2.14) (1.12) (2.57) (.60)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.33 $ 16.30 $ 16.28 $ 16.82 $ 15.48
======== ======== ======== ======== ========
Total Based on net asset value per share (12.22%) 14.60% 3.75% 26.96% 5.59%
Investment ======== ======== ======== ======== ========
Return:*
Ratios to Expenses, excluding distribution fees .99% .91% .92% .98% 1.00%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.99% 1.91% 1.92% 1.98% 2.00%
======== ======== ======== ======== ========
Investment income (loss)--net (.38%) (.07%) .36% .83% 1.53%
======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of year (in thousands) $119,186 $396,424 $447,186 $476,106 $442,944
Data: ======== ======== ======== ======== ========
Portfolio turnover 45.86% 48.63% 40.58% 48.28% 25.57%
======== ======== ======== ======== ========
<FN>
*Total investment return excludes the effect of sales loads.
++Based on average shares outstanding during the year.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
January 31, 1995++++
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 14.08 $ 14.26
Operating ------------ ------------
Performance: Investment loss--net (.04) (.01)
Realized and unrealized loss on investments and foreign currency
transactions--net (.54) (.49)
------------ ------------
Total from investment operations (.58) (.50)
------------ ------------
Less distributions:
Realized gain on investments--net (.22) (.22)
------------ ------------
Total distributions (.22) (.22)
------------ ------------
Net asset value, end of period $ 13.28 $ 13.54
============ ============
Total Investment Based on net asset value per share (4.12%)+++ (3.50%)+++
Return:** ============ ============
Ratios to Expenses, excluding account maintenance and distribution fees 1.26%* 1.18%*
Average Net ============ ============
Assets: Expenses 2.26%* 1.43%*
============ ============
Investment loss--net (.87%)* (.23%)*
============ ============
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 80 $ 156,947
Data: ============ ============
Portfolio turnover 45.86% 45.86%
============ ============
<FN>
*Annualized.
**Total investment return excludes the effect of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
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 company. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(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.
Options, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. 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 approximates market value.
<PAGE>
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Options--The Fund can write covered call options. When the Fund
writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The
amount of the liability is subsequently marked to market to reflect
the current market value of the option written. When a security is
sold through an exercise of an option, the related premium received
is deducted from the basis of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premium
received (or gain or loss to the extent of the cost of the closing
transaction is less than or exceeds the premium received).
(c) Foreign currency transactions--Transactions denominated 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
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) 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
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
(e) 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 Fund is 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.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions to shareholders--Dividends and
distributions paid by the Fund are recorded on the ex-dividend
dates.
<PAGE>
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. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch and Co., Inc. ("ML & Co."), which
is the general partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, 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 obligates
MLAM to reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary 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 the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are
accrued daily and paid monthly at annual rates based upon the
average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended January 31, 1995, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $354 $6,371
Class D $772 $8,628
MLPF&S also received contingent deferred sales charges of $94,070
relating to transactions in Class B Shares, and $16,500 in
commissions on the execution of portfolio security transactions for
the Fund for the year ended January 31, 1995.
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, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended January 31, 1995 were $144,185,022 and
$219,397,319, respectively.
Net realized and unrealized gains (losses) as of January 31, 1995
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 16,365,261 $ 15,227,845
Short-term investments (39) --
Foreign currency transactions (31,963) (123)
------------- -------------
Total $ 16,333,259 $ 15,227,722
============= =============
As of January 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $15,227,845, of which $40,287,464
related to appreciated securities and $25,059,619 related to
depreciated securities. The aggregate cost of investments at January
31, 1995 for Federal income tax purposes was $262,021,824.
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Capital Stock Transactions:
Net decrease in net assets derived from capital share transactions
was $53,039,480 and $52,481,091 for the years ended January 31, 1995
and January 31, 1994, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended January 31, 1995 Shares Amount
Shares sold 140,801 $ 2,045,990
Shares issued to shareholders
in reinvestment of
distributions 42,701 565,182
Total issued 183,502 2,611,172
Shares redeemed (211,252) (3,023,836)
------------- -------------
Net decrease (27,750) $ (412,664)
============= =============
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 Year Dollar
Ended January 31, 1995 Shares Amount
Shares sold 1,037,837 $ 15,121,525
Shares issued to shareholders
in reinvestment of
distributions 1,252,531 16,408,961
------------- -------------
Total issued 2,290,368 31,530,486
Shares redeemed (5,496,974) (78,448,291)
Conversion of shares (12,176,864) (169,494,498)
------------- -------------
Net decrease (15,383,470) $(216,412,303)
============= =============
Class B Shares for the
Year Ended Dollar
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)
============= =============
Class C Shares for the
Period October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 6,002 $ 80,820
Shares issued to shareholders
in reinvestment of
distributions 12 157
------------- -------------
Total issued 6,014 80,977
Shares redeemed (1) (14)
------------- -------------
Net increase 6,013 $ 80,963
============= =============
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the
Period October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 70,886 $ 970,143
Conversion of shares 12,012,646 169,494,498
Shares issued to shareholders
in reinvestment of
distributions 157,005 2,075,598
------------- -------------
Total issued 12,240,537 172,540,239
Shares redeemed (646,609) (8,835,715)
------------- -------------
Net increase 11,593,928 $ 163,704,524
============= =============
[FN]
++Commencement of Operations.
5. Loaned Securities:
At January 31, 1995, the Fund held US Treasury Notes and US Treasury
Bonds having an aggregate value of approximately $12,234,000 as
collateral for portfolio securities loaned having a market value of
approximately $10,375,000.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Fund For Tomorrow, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Fund For Tomorrow, Inc. as of January 31, 1995, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for each of the years in the five-year
period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at January
31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Fund For Tomorrow, Inc. as of January 31, 1995, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
March 8, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions
paid by Merrill Lynch Fund For Tomorrow, Inc. during the year ended
January 31, 1995:
<TABLE>
<CAPTION>
Record Payable Domestic Qualifying Domestic Non-Qualifying Total Long-Term
Date Date Ordinary Income Ordinary Income Ordinary Income Capital Gains
<S> <C> <C> <C> <C> <C>
Class A Shares:
07/05/94 07/13/94 $0.143358 $0.056032 $0.199390 $0.547982
12/12/94 12/20/94 $0.052783 -- $0.052783 $0.163059
Class B Shares:
07/05/94 07/13/94 $0.132670 $0.051854 $0.184524 $0.547982
12/12/94 12/20/94 $0.052783 -- $0.052783 $0.163059
Class C Shares:
12/12/94 12/20/94 $0.052783 -- $0.052783 $0.163059
Class D Shares:
12/12/94 12/20/94 $0.052783 -- $0.052783 $0.163059
</TABLE>
The domestic qualifying ordinary income qualifies for the dividends-
received deduction for corporations. Please retain this information
for your records.
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended January 31, 1995
Percent of
Ten Largest Equity Holdings Net Assets
Chrysler Corp. 4.5%
Nokia Corp. AB (Conv. Pfd.) (ADR) 3.9
Schering-Plough Corp. 3.8
The News Corp. Ltd. (ADR)* 3.6
International Business Machines Corp. 3.3
Thermo Electron Corp. 2.8
General Motors Corp. 2.7
Telefonos de Mexico, S.A. de C.V. (ADR) 2.4
Magna International, Inc. 2.3
PepsiCo, Inc. 2.3
[FN]
*Includes Convertible Preferred Stock.
Additions
ASEA AB
*British Sky Broadcasting Group PLC
Cannondale Corp.
Carnival Corp. (Class A)
Champion Technology Holdings Ltd.
Daisytek International Corp.
Kimberly-Clark Corp.
Motorola, Inc.
Mylan Laboratories Inc.
OfficeMax, Inc.
Philips Electronics N.V. (ADR)
Royal Plastic Group Limited
*The Sports Authority, Inc.
Thermo Ecotek (Rights)
VLSI Technology, Inc.
Wendy's International, Inc.
Westcott Communications, Inc.
<PAGE>
Deletions
ADT Ltd.
Amoco Corp.
*British Sky Broadcasting Group PLC
BroadBand Technologies, Inc.
Broderbund Software, Inc.
CableMaxx,Inc.
Corporate Express, Inc.
FHP International Corp.
Hayes Wheels International, Inc.
Intel Corp.
LodgeNet Entertainment Corp.
Manhattan Card Co. Ltd.
Mobil Oil Corp.
Purus Inc.
Rollins, Inc.
*The Sports Authority, Inc.
SunAmerica Inc.
Thai Telephone & Telecommunication PLC
YPF S.A. (ADR)
[FN]
*Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A.Montgomery, 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
90 Washington Street, 12th Floor
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
