MERRILL LYNCH
FUND FOR
TOMORROW, INC.
STRATEGIC
Performance
Quarterly Report
October 31, 1997
<PAGE>
MERRILL LYNCH FUND FOR TOMORROW, INC.
Concept Sectors
[PIE GRAPH OMITTED]
Pie graph depicting Concept Sectors As a Percentage of Net Assets
As of October 31, 1997
Computer Technologies 9.9%
Demographic Trends 8.7%
Developing Foreign Economies 5.6%
Future Retailing 0.8%
Global Market Expansion 9.7%
Healthcare Cost Containment 13.6%
Industrial Outsourcing 3.6%
Industrial Renaissance 9.4%
Multimedia 9.9%
Next Generation Technology 4.4%
Strategic Growth Opportunities 7.8%
Telecommunications 8.9%
Cash* 7.7%
*Net of other assets less liabilities.
Growth Stock Characteristics as of October 31, 1997
[BAR GRAPH OMITTED]
Bar graph depicting Growth Stock Characteristics as of October 31, 1997
as a % of Equity Holdings:
Emerging Growth 4.6% 9.4%
Established Growth 23.1% 18.9%
Stable Growth 23.2% 20.8%
1
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
DEAR SHAREHOLDER
Volatility highlighted stock and bond markets worldwide during the quarter ended
October 31, 1997. The difficulties began in Southeast Asia. Following the
currency devaluations in several Southeast Asian countries this summer, the Hong
Kong dollar--the value of which is pegged to the US dollar--came under
speculative attack in foreign currency markets. Monetary authorities in Hong
Kong raised interest rates to support the currency, and the Hong Kong stock
market declined sharply. This event raised investor concerns worldwide regarding
the viability of continued global economic growth.
At first, US stock market investors focused on the challenges that would face US
multinational corporations in the wake of the poorer Asian economic prospects.
The sell-off then broadened to other stocks as well, leading to a 554-point
decline in the Dow Jones Industrial Average on October 27. Although the decline
proved to be short-lived, investor confidence was not definitively restored, and
stock market volatility continued. Although the US bond market benefited during
periods when investors anticipated slower economic growth, the release of
stronger-than-expected economic statistics led to periods of declining bond
prices.
As 1997 draws to a close, investors are likely to continue to focus on the
prospects for the US economy. Although the Federal Reserve Board did not tighten
monetary policy at its November 12 meeting, it remains to be seen whether US
economic growth remains moderate enough and inflationary pressures sufficiently
contained to preclude an increase in short-term interest rates.
Portfolio Strategy
Throughout most of 1997, the stock market showed substantial volatility despite
the strong upward trend in stock prices. This volatility was especially intense
during the three months ended October 31, 1997. The period began with generally
lower stock prices in August which rebounded sharply in September, only to
decline again during the month of October. While economic caution prevailed
throughout the October quarter and concerns of higher interest rates kept
investors' enthusiasm somewhat muted, the most significant event that shaped the
quarter's investment performance occurred during the last week of October.
Mounting problems in Asian currencies caused Far Eastern stock markets to drop
sharply. This impacted Latin America, the United States and the other world
stock markets as well.
For the October quarter, the Standard & Poor's 500 Composite Index declined
3.73%, while earlier strength in smaller-capitalization companies enabled the
NASDAQ Index to show a slightly positive return of +0.64%. Foreign stocks, as
measured by the unmanaged Morgan Stanley Europe, Australia and Far East Index,
dropped more than 9.8% during the three-month period. For the quarter ended
October 31, 1997, total returns for Merrill Lynch Fund For Tomorrow, Inc.'s
Class A, Class B, Class C and Class D Shares were -3.48%, -3.73%, -3.70% and
- -3.55%, respectively. (Results shown do not reflect sales charges; results would
be lower if sales charges were included. For complete performance information,
including average annual total returns, see pages 4-6 of this report to
shareholders.)
Although we maintained a somewhat cautious investment strategy during the
October quarter, we were impressed by the solid fundamental condition of the US
economy. Accordingly, our invested position in common stocks remained virtually
unchanged from the July quarter and cash reserves increased only modestly.
However, despite our favorable macroeconomic outlook, we were less optimistic
about the relatively high level of stock prices. Therefore, we exercised caution
in our investment activities as we sought to take profits among
strong-performing individual holdings where we believed valuations had risen to
near our target levels. In addition, buying activity was somewhat subdued
because attractive values were becoming more scarce in a lengthy stock market
uptrend. Our investment strategy focused on specific companies that were either
showing strong growth or had developed valuations that reflected near-term
uncertainties rather than longer-term potential.
Among the additions to the portfolio, we supplemented our Computer Technologies
concept by investing in Gateway 2000, Inc., a major factor in personal
computers. This company recently has experienced problems in its direct
marketing strategy, which we believe caused only temporary profit dislocations.
The stock, selling at half the valuation of its larger peer group, has the
potential for significant appreciation based on expectations of a resumption of
earnings growth, in our opinion.
2
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
Other additions to the portfolio included companies with strong growth potential
within specific markets. American Woodmark Corporation is a major supplier of
kitchen cabinetry to the home improvement market; The Children's Place Retail
Stores, Inc. sells discount quality children's apparel; Sterling Commerce, Inc.
provides commerce software and networking services; and RSL Communications, Ltd.
provides alternative telecommunication service to business on a multinational
basis.
Some of the positive highlights of the October quarter involved existing
holdings that were the beneficiaries of favorable corporate developments. In all
cases, these stocks performed well in excess of the stock market as a whole.
Examples include COMPAQ Computer Corp. which reported third-quarter profits of
+42% above the prior year, and above analysts' estimates. Eli Lilly and Company
also exceeded earnings forecasts and announced the expectation of Food and Drug
Administration approval for its new osteoporosis/cancer drug, Evista, which has
long-term sales potential in the multi-billion dollar range. Exciting
developments in Inter-Tel Inc. further confirmed our initial basis for buying
shares in the company. The company announced its new Vocalnet product which
enables telephone service to be provided over the Internet.
There were also some negative developments which impacted various holdings
during the October quarter. Most of these occurrences pertained to disappointing
earnings. For example, Silicon Graphics, Inc. reported a continuation of
problems within its enterprise-server market. However, with a major internal
restructuring, the company is expected to resume strong growth in 1998. Seagate
Technology, Inc. also reported a slowdown in its disk-drive products, which may
take several months to stabilize. Finally, our holding of Lewis Galoob Toys,
Inc. declined sharply following a disappointing near-term earnings outlook.
Nevertheless, we remain strongly optimistic for the longer-term based on the
more recent announcement that the company has acquired the potentially lucrative
rights to make toys based on future "Star Wars" movies.
In terms of overall portfolio structure, most of our concept sector weightings
remained similar to the July quarter. However, we did make some changes within
the various sectors which were the result of stock price performance more than
deliberate shifts in asset allocation. The most significant of these changes was
in the Fund's telecommunications sector where the addition of one new holding,
accompanied by relatively strong price appreciation of Inter-tel, Inc., raised
the weighting of this sector to 8.9% of portfolio assets. Other changes occurred
which are depicted in the "Growth Stock Characteristics" graph on page 1. The
stable growth categories of stocks increased from the July quarter, which was
consistent with our more defensive investment strategy. The emerging growth
categories remained at approximately 14.0% of investments, which is at the lower
end of our normal range.
Despite the recent turmoil in the financial markets, we remain committed to the
concept of steady, moderate economic growth in the United States and other
regions of the world despite a potential slowdown in Asia. While the equity
markets have undergone a modest correction from their lengthy upward trend, we
believe a more disciplined attention to valuation and more reasonable growth
expectations will result. Our investment strategy has consistently placed
primary importance on the long term based on our belief that interim buying
opportunities often become attractive long-term investments. We continue to
believe that this process tends to limit the effects of periodic stock market
volatility and enhance the potential for capital appreciation.
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,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Vincent P. Dileo
Vincent P. Dileo
Vice President and Portfolio Manager
December 1, 1997
3
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill Lynch
Select Pricing(SM) System, which offers four pricing alternatives:
o 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.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o 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.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of future
performance. Figures shown in the "Average Annual Total Return" tables as well
as the total returns and cumulative total returns in the "Performance Summary"
tables assume reinvestment of all dividends and capital gains distributions at
net asset value on the ex-dividend date. Investment return and principal value
of shares will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution and
transfer agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
Recent Performance Results
<TABLE>
<CAPTION>
12 Month 3 Month
10/31/97 7/31/97 10/31/96 % Change % Change
===============================================================================================================
<S> <C> <C> <C> <C> <C>
ML Fund For Tomorrow, Inc. Class A Shares* $ 19.13 $ 19.82 $ 17.27 +22.20%(1) -3.48%
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class B Shares* 18.35 19.06 16.64 +22.05(1) -3.73
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class C Shares* 18.21 18.91 16.56 +21.79(1) -3.70
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class D Shares* 19.01 19.71 17.18 +22.12(1) -3.55
- ---------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** 914.62 954.29 705.27 +29.68 -4.16
- ---------------------------------------------------------------------------------------------------------------
NASDAQ Industrial Index** 1,268.69 1,260.56 1,076.64 +17.84 +0.64
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class A Shares--Total Return* +27.80(2) -3.48
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class B Shares--Total Return* +26.49(3) -3.73
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class C Shares--Total Return* +26.41(4) -3.70
- ---------------------------------------------------------------------------------------------------------------
ML Fund For Tomorrow, Inc. Class D Shares--Total Return* +27.43(5) -3.55
- ---------------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index--Total Return** +32.09 -3.73
===============================================================================================================
</TABLE>
* 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.
(1) Percent change includes reinvestment of $1.696 per share capital gains
distributions.
(2) Percent change includes reinvestment of $0.814 per share ordinary income
dividends and $1.696 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.627 per share ordinary income
dividends and $1.696 per share capital gains distributions.
(4) Percent change includes reinvestment of $0.649 per share ordinary income
dividends and $1.696 per share capital gains distributions.
(5) Percent change includes reinvestment of $0.769 per share ordinary income
dividends and $1.696 per share capital gains distributions.
4
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
PERFORMANCE DATA (continued)
Performance Summary--Class A Shares
<TABLE>
<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
- ----------------------------------------------------------------------------------------
1995 13.66 15.84 1.354 0.195 +27.39
- ----------------------------------------------------------------------------------------
1996 15.84 15.88 1.397 0.825 +13.98
- ----------------------------------------------------------------------------------------
1/1/97 -- 10/31/97 15.88 19.13 0.298 0.099 +23.02
- ----------------------------------------------------------------------------------------
Total $11.429 Total $3.794
========================================================================================
Cumulative total return as of 10/31/97: +205.86%**
========================================================================================
</TABLE>
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales
charge was included.
Performance Summary -- Class B Shares
<TABLE>
<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
- ---------------------------------------------------------------------------------------
1995 13.45 15.40 1.354 0.195 +26.08
- ---------------------------------------------------------------------------------------
1996 15.40 15.37 1.397 0.656 +12.85
- ---------------------------------------------------------------------------------------
1/1/97-- 10/31/97 15.37 18.35 0.298 0.081 +21.90
- ---------------------------------------------------------------------------------------
Total $13.284 Total $3.390
=======================================================================================
Cumulative total return as of 10/31/97: +430.94%**
=======================================================================================
</TABLE>
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be
lower if sales charge was deducted.
5
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
PERFORMANCE DATA (concluded)
Performance Summary--Class C Shares
<TABLE>
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
======================================================================================
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $14.08 $13.39 $0.157 $0.059 -3.32%
- --------------------------------------------------------------------------------------
1995 13.39 15.33 1.354 0.195 +26.12
- --------------------------------------------------------------------------------------
1996 15.33 15.25 1.397 0.679 +12.73
- --------------------------------------------------------------------------------------
1/1/97 -- 10/31/97 15.25 18.21 0.298 0.079 +21.93
- --------------------------------------------------------------------------------------
Total $3.206 Total $1.012
======================================================================================
Cumulative total return as of 10/31/97: +67.60%**
======================================================================================
</TABLE>
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be
lower if sales charge was deducted.
Performance Summary--Class D Shares
<TABLE>
<CAPTION>
Net Asset Value Capital Gains Dividends
Period Covered Beginning Ending Distributed Paid* % Change**
======================================================================================
<S> <C> <C> <C> <C> <C>
10/21/94 -- 12/31/94 $14.26 $13.65 $0.157 $0.059 -2.71%
- --------------------------------------------------------------------------------------
1995 13.65 15.79 1.354 0.195 +27.11
- --------------------------------------------------------------------------------------
1996 15.79 15.82 1.397 0.783 +13.71
- --------------------------------------------------------------------------------------
1/1/97 -- 10/31/97 15.82 19.01 0.298 0.095 +22.70
- --------------------------------------------------------------------------------------
Total $3.206 Total $1.132
======================================================================================
Cumulative total return as of 10/31/97: +72.54%**
======================================================================================
</TABLE>
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales
charge was included.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 9/30/97 +33.66% +26.64%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/97 +16.04 +14.79
- --------------------------------------------------------------------------------
Inception (10/26/88)
through 9/30/97 +14.20 +13.51
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 9/30/97 +32.25% +31.25%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/97 +21.99 +21.99
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/97 +32.27% +28.27%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/97 +14.83 +14.83
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/97 +11.13 +11.13
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 9/30/97 +33.31% +26.31%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/97 +23.19 +20.95
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
6
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Percent of
Concept Tomorrow Held Stocks Cost Value Net Assets
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Technologies
- ------------------------------------------------------------------------------------------------------------------------------------
Personal Computers 250,000 COMPAQ Computer Corp. $ 3,732,102 $15,937,500 4.8%
Personal Computers 100,000 Gateway 2000, Inc. 3,347,740 2,868,750 0.9
Components 100,000 Seagate Technology, Inc. 2,750,475 2,712,500 0.8
Systems 300,000 Silicon Graphics, Inc. 11,151,240 4,406,250 1.3
Systems 200,000 Sun Microsystems, Inc. 5,396,880 6,837,500 2.1
---------- ----------- ---
26,378,437 32,762,500 9.9
- ------------------------------------------------------------------------------------------------------------------------------------
Demographic Trends
- ------------------------------------------------------------------------------------------------------------------------------------
Home Furnishings 50,000 American Woodmark Corporation 1,037,187 1,043,750 0.3
Healthcare 200,000 HEALTHSOUTH Corp. 3,537,000 5,112,500 1.6
Healthcare 100,000 Living Centers of America, Inc. 3,353,090 4,031,250 1.2
Pollution Technology 550,000 Philip Services Corp. 5,122,752 9,625,000 2.9
Insurance 200,000 Torchmark Corp. 4,206,236 7,975,000 2.4
Restaurants 16,000 Tricon Global Restaurants, Inc. (a) 206,587 485,000 0.1
Healthcare 50,000 United Dental Care, Inc. 1,448,438 668,750 0.2
---------- ----------- ---
18,911,290 28,941,250 8.7
- ------------------------------------------------------------------------------------------------------------------------------------
Developing Foreign Economies
- ------------------------------------------------------------------------------------------------------------------------------------
Food & Beverage 1,000,000,000 Avipal S.A.--Avicultura e Agropecuaria 4,212,834 3,084,180 0.9
Telecommunications 105,000 Compania Anonima Nacional Telefonos de
Venezuela (ADR)* 2,415,000 4,593,750 1.4
Specialty Services 1,000,000 National Mutual Asia Ltd. 940,132 905,563 0.3
Oil Refining 12,000,000 Petroleo Brasileiro S.A.--Petrobras (Preferred) 3,695,257 2,231,495 0.7
Holding Company 200,000 Quinenco S.A. (ADR)* 3,755,087 2,925,000 0.9
Building Materials 100,000 Royal Group Technologies Ltd. 1,047,206 2,548,449 0.8
Telecommunications 463 SK Telecom Co. 533,107 156,658 0.0
Telecommunications 20,000,000 Telecomunicacoes do Rio de Janeiro S.A.--Telerj
(Preferred) 3,225,852 1,904,935 0.6
Telecommunications 775,479 Telecomunicacoes do Rio de Janeiro S.A.--Telerj
(Rights) (b) 0 10,552 0.0
---------- ----------- ---
19,824,475 18,360,582 5.6
- ------------------------------------------------------------------------------------------------------------------------------------
Future Retailing
- ------------------------------------------------------------------------------------------------------------------------------------
Retail Apparel 40,000 The Children's Place Retail Stores, Inc. 560,000 240,000 0.1
Specialty Retail 188,900 OfficeMax, Inc. 2,027,656 2,526,537 0.7
---------- ----------- ---
2,587,656 2,766,537 0.8
- ------------------------------------------------------------------------------------------------------------------------------------
Global Market Expansion
- ------------------------------------------------------------------------------------------------------------------------------------
Cosmetics 174,400 Avon Products, Inc. 6,259,222 11,423,200 3.4
Food & Beverage 44,000 ConAgra Inc. 859,320 1,325,500 0.4
Electrical Equipment 74,760 General Electric Company (c) 2,278,626 4,826,692 1.5
Machinery 9,800 Kubota Corp. (ADR)* 1,259,888 739,900 0.2
Food & Beverage 160,000 PepsiCo, Inc. 2,438,212 5,890,000 1.8
Electronics 100,000 Philips Electronics N.V. (ADR)* 4,983,486 7,837,500 2.4
---------- ----------- ---
18,078,754 32,042,792 9.7
====================================================================================================================================
</TABLE>
7
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Concept Tomorrow Held Stocks Cost Value Net Assets
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Healthcare Cost Containment
- ------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 133,333 Astra AB (ADR)* $ 1,781,250 $ 2,124,995 0.7%
Pharmaceuticals 100,000 Bristol-Myers Squibb Co. 3,953,500 8,775,000 2.7
Pharmaceuticals 100,000 Lilly (Eli) and Company 2,286,050 6,687,500 2.0
Pharmaceuticals 100,900 Merck & Co., Inc. 4,001,062 9,005,325 2.7
Pharmaceuticals 50,000 Novartis AG (ADR)* 1,942,188 3,900,000 1.2
Information Services 300,000 Physician Computer Network, Inc. 3,074,250 1,612,500 0.5
Pharmaceuticals 100,800 Schering-Plough Corp. 580,167 5,651,100 1.7
Pharmaceuticals 200,000 Sequus Pharmaceuticals, Inc. 2,866,248 1,800,000 0.5
Medical Devices 100,000 United States Surgical Corp. 6,799,013 2,693,750 0.8
Medical Services 100,000 Vencor, Inc. 3,194,630 2,700,000 0.8
----------- ---------- ----
30,478,358 44,950,170 13.6
- ------------------------------------------------------------------------------------------------------------------
Industrial Outsourcing
- ------------------------------------------------------------------------------------------------------------------
Information Services 50,000 Ceridian Corp. 1,959,250 1,953,125 0.6
Systems 50,000 Computer Sciences Corporation 3,878,500 3,546,875 1.1
Specialty Services 47,028 National Data Corporation 2,127,181 1,737,097 0.5
Specialty Services 250,000 Sitel Corporation 3,939,288 2,218,750 0.7
Computer Software 50,000 Sterling Commerce, Inc. 1,838,339 1,659,375 0.5
Aerospace & Defense 19,700 Triumph Group, Inc. 534,070 640,250 0.2
----------- ---------- ----
14,276,628 11,755,472 3.6
- ------------------------------------------------------------------------------------------------------------------
Industrial Renaissance
- ------------------------------------------------------------------------------------------------------------------
Aerospace & Defense 50,000 The Boeing Company 2,645,250 2,393,750 0.7
Transportation 75,000 Delta Air Lines, Inc. 5,782,613 7,556,250 2.3
Automotive 100,000 General Motors Corp. 4,190,900 6,418,750 1.9
Information Systems 150,000 International Business Machines Corp. 4,246,375 14,709,375 4.5
----------- ---------- ----
16,865,138 31,078,125 9.4
- ------------------------------------------------------------------------------------------------------------------
Multimedia
- ------------------------------------------------------------------------------------------------------------------
Broadcasting Services 200,000 Carlton Communications PLC (ADR)* 7,266,875 8,425,000 2.5
Components 150,000 Harman International Industries Inc. 6,836,788 8,100,000 2.5
Information Services 400,000 OzEmail, Ltd. (ADR)* 4,632,341 4,650,000 1.4
Cable Television 150,000 Tele-Communications Liberty Media Group
(Class A) 2,675,003 5,212,500 1.6
Publishing Services 250,000 World Color Press Inc. 4,956,000 6,328,125 1.9
----------- ---------- ----
26,367,007 32,715,625 9.9
- ------------------------------------------------------------------------------------------------------------------
Next Generation Technology
- ------------------------------------------------------------------------------------------------------------------
Pollution Technology 400,000 Molten Metal Technology, Inc. 6,605,221 1,400,000 0.4
Environmental Equipment 119,400 Thermo Ecotek Corp. 1,281,614 1,693,987 0.5
Multi-Industry 230,000 Thermo Electron Corp. 4,937,738 8,581,875 2.6
Medical Devices 100,000 Thermotrex Corp. 1,586,723 2,300,000 0.7
Components 150,000 Voice Control Systems Inc. 834,037 506,250 0.2
----------- ---------- ----
15,245,333 14,482,112 4.4
==================================================================================================================
</TABLE>
8
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Concept Tomorrow Held Stocks Cost Value Net Assets
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Strategic Growth Opportunities
- ------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 100,000 American Home Products Corp. $ 3,875,049 $ 7,412,500 2.3%
Leisure & Entertainment 300,000 Galoob (Lewis) Toys, Inc. 4,238,645 3,956,250 1.2
Specialty Services 100,000 Household International, Inc. 6,712,565 11,325,000 3.4
Retail 88,400 Toys `R' Us, Inc. 2,700,054 3,011,125 0.9
------------ ------------ -----
17,526,313 25,704,875 7.8
- ------------------------------------------------------------------------------------------------------------------------
Telecommunications
- ------------------------------------------------------------------------------------------------------------------------
Telecommunications 100,000 ADC Telecommunications, Inc. 2,867,500 3,312,500 1.0
Telecommunications 200,000 Alcatel Alsthom Cie Generale
d'Electricite S.A. (ADR)* 5,087,260 4,862,500 1.5
Components 120,000 Andrew Corp. 2,299,683 2,775,000 0.8
Telecommunications 300,000 Inter-Tel Inc. 2,153,750 7,425,000 2.2
Components 100,000 Nokia Corp. AB (ADR)* 3,778,500 8,825,000 2.7
Telecommunications 100,000 RSL Communications, Ltd. (Class A) 2,200,000 2,312,500 0.7
------------ ------------ -----
18,386,693 29,512,500 8.9
========================================================================================================================
Total Stocks 224,926,082 305,072,540 92.3
========================================================================================================================
Face
Amount Short-Term Securities
========================================================================================================================
Commercial $ 6,365,000 General Motors Acceptance Corp.,
Paper** 5.75% due 11/03/1997 6,362,967 6,362,967 1.9
9,000,000 Lexington Parker Capital Company,
5.52% due 11/04/1997 8,995,860 8,995,860 2.7
========================================================================================================================
US Government 6,000,000 Federal Home Loan Mortgage Corp.,
Agency Obligations** 5.39% due 11/07/1997 5,994,610 5,994,610 1.8
========================================================================================================================
Total Short-Term Securities 21,353,437 21,353,437 6.4
========================================================================================================================
Total Investments $246,279,519 326,425,977 98.7
============
Other Assets Less Liabilities 4,158,812 1.3
------------ -----
Net Assets $330,584,789 100.0%
============ =====
========================================================================================================================
Net Asset Class A -- Based on net assets of $14,587,448 and 762,467 shares outstanding $ 19.13
Value: ============
Class B -- Based on net assets of $69,303,064 and 3,776,831 shares outstanding $ 18.35
============
Class C -- Based on net assets of $3,284,714 and 180,403 shares outstanding $ 18.21
============
Class D -- Based on net assets of $243,409,563 and 12,801,791 shares outstanding $ 19.01
============
========================================================================================================================
</TABLE>
* American Depositary Receipts (ADR).
** Commercial Paper and certain US Government Agency Obligations are traded
on a discount basis; the interest rates shown are the discount rates paid
at the time of purchase by the Fund.
(a) Tricon Global Restaurants, Inc. was received through a spin-off by
PepsiCo, Inc.
(b) The rights may be exercised until 11/15/97.
(c) Fund holding, Greenwich Air Services (Class A and Class B) was acquired by
General Electric Company.
9
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
PORTFOLIO INFORMATION
For the Quarter Ended October 31, 1997
Percent of
Ten Largest Equity Holdings Net Assets
COMPAQ Computer Corp............ 4.8%
International Business Machines
Corp. ......................... 4.5
Avon Products, Inc.............. 3.4
Household International, Inc.... 3.4
Philip Services Corp............ 2.9
Merck & Co., Inc................ 2.7
Nokia Corp. AB (ADR)............ 2.7
Bristol-Myers Squibb Co......... 2.7
Thermo Electron Corp............ 2.6
Carlton Communications PLC (ADR) 2.5
Additions
American Woodmark Corporation
The Children's Place Retail Stores, Inc.
Gateway 2000, Inc.
RSL Communications, Ltd. (Class A)
Sterling Commerce, Inc.
Deletions
Biomet, Inc.
Gasonics International Corp.
IDX Systems Corp.
Mattel, Inc.
Neuromedical Systems Inc.
Oakley, Inc.
10
<PAGE>
Merrill Lynch Fund For Tomorrow, Inc. October 31, 1997
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, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
11
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
Fund For Tomorrow, Inc.
Box 9011
Princeton, NJ
08543-9011 #10261 -- 10/97
[LOGO] Printed on post-consumer recycled paper
