MERRILL LYNCH
GROWTH FUND
For Investment and
Retirement
FUND LOGO
Quarterly Report
January 31, 1995
Officers and Trustees
Arthur Zeikel, President and Trustee
Kenneth S. Axelson, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Stephen C. Johnes, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Jerry Weiss, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<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.
Merrill Lynch
Growth Fund
For Investment
And Retirement
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Growth Fund for Investment and Retirement
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.
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.
<PAGE>
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 the January quarter Merrill Lynch Growth Fund for Investment
and Retierment's performance was negatively impacted by weakness in
certain basic industry holdings and, more importantly, by weak
energy prices. Anticipation of further increases in interest rates
weighed heavily on share prices for the industrial sectors of the
equity market as well as some of the Fund's basic industry and
technology holdings. Nevertheless, this price weakness was largely
offset by other company-specific events that pushed valuations of
several of the Fund's technology holdings higher.
Regarding the Fund's energy holdings, the key factor influencing
performance was the weather. Specifically, through the end of
January, the winter of 1994--1995 was relatively mild across all of
North America. For example, in the continental United States winter
temperatures through January month-end were 15% warmer than a year
ago and 12% warmer than normal as measured by heating degree days.
In this context, reduced seasonal heating demand requirements for
natural gas and fuel oil have negatively impacted commodity prices
and the share prices of energy-related equities.
While discouraging, we believe that this seasonal aberration in
weather and its impact on energy prices does not undermine the
positive secular trends driving natural gas and oil consumption.
Looking further into 1995 against the backdrop of a strong US and
global economic recovery, growth in energy consumption gives a
positive bias to energy pricing. For North American natural gas, we
believe that the incremental demand derived from a strong economy
will be augmented by gains in market share for natural gas, since it
is a more efficient, environmentally friendly and domestically
secure fuel source. It is also worth noting that while cash flow and
revenues for most of the Fund's energy holdings are clearly
sensitive to changes in commodity market pricing, the Fund's energy
holdings are uniquely positioned to grow independent of the short-
term commodity pricing environment, in our view. A good example is
Associated Natural Gas Corp., recently acquired by Panhandle
Eastern Corporation, as we discuss later in this letter. With this
sensitivity to short-term pricing swings in mind, we used this
period of price weakness to selectively increase our existing energy
positions and to add the common stock of United Meridian Corp. to
the Fund.
<PAGE>
United Meridian's recent acquisition of General Atlantic Resources
created a midsize North American independent crude oil and natural
gas exploration and production company with exposure to several
potentially significant international exploration projects.
Historically, both companies have pursued aggressive reserve
acquisition and development strategies. We believe that United
Meridian's current share price deeply discounts the value of the
company's reserve base and growth potential. In addition, investors
currently do not appear to be ascribing any value to the potential
benefits of United Meridian's international exploration program.
During the January quarter, one of our most successful energy
holdings, Associated Natural Gas Corp., was acquired by Panhandle
Eastern Corp., one of the nation's largest interstate gas pipelines.
As our long-term shareholders will recall, Associated Natural Gas
was an industry-leading natural gas gathering and marketing company
that was able to significantly grow its business in the wake of
deregulation of the natural gas industry. In acquiring Associated's
superior gas marketing presence and strong gas gathering system,
Panhandle Eastern has become the third-largest marketer of natural
gas in North America. By leveraging the combined asset base of the
two companies, we believe that Panhandle Eastern is positioned to
grow earnings and cash flow and will be a leader as the natural gas
transportation and marketing industry continues to consolidate. With
this in mind, we chose to retain the Panhandle Eastern shares
received in the merger.
Concerns of further increases in interest rates that caused declines
in certain of the Fund's basic industry holdings in the January
quarter also depressed valuations in financial-related equities, in
particular bank stocks. We took advantage of this market weakness to
establish an investment in Republic New York Corp., the holding
company for Republic National Bank of New York. Unlike other
commercial banks that emphasize loan origination as the source of
revenue and earnings growth, Republic has grown with a focus on its
depositors. This emphasis, in conjunction with its conservative
financial management, has historically made the bank's earnings less
sensitive to changes in interest rates than most other commercial
banks. While we would expect a decline in interest rates to enhance
Republic's earnings, we believe that the primary source of earnings
growth for Republic in 1995 will be from new fee-based products and
services developed over the past 18 months. Given Republic's unique
operating profile and current business momentum, we believe that the
sell-off in financial services' stock prices late in 1994 allowed us
to establish a position in Republic at attractive levels.
<PAGE>
During the January quarter, we substantially increased our
investment in Freeport-McMoRan, Inc. Freeport-McMoRan is the parent
company of Freeport-McMoRan Copper & Gold, Inc. (also a Fund
holding) and Freeport-McMoRan Resource Partners, an agricultural
minerals subsidiary. Later in 1995, Freeport-McMoRan, Inc. is
expected to complete a restructuring that will effectively spin off
the two subsidiaries to its shareholders. We believe that the shares
of the parent represent significant value as they trade at a
meaningful discount to the value of the two subsidiaries. Longer
term, we remain encouraged by the prospects for both of these
business entities and therefore viewed the pricing discontinuity
between their shares and that of their parent company as an
opportunity to add to the Fund's holdings.
In Conclusion
At this time, we do not anticipate making major changes in the
Fund's investment strategy. As we have often noted in our reports to
shareholders, we continue to believe that our investments in the
energy and technology sectors offer attractive long-term total
return potential. Therefore, we expect that we will continue to use
periods of volatility as buying opportunities to establish positions
or increase holdings in companies that we view as particularly well-
positioned.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen C. Johnes)
Stephen C. Johnes
Vice President and Portfolio Manager
February 28, 1995
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:
<PAGE>
*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," "Recent Performance Results"
and "Average Annual Total Return" tables on pages 3, 4 and 5. 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 5.
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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 + 1.77% - 3.57%
Five Years Ended 12/31/94 +13.16 +11.94
Inception (11/28/88)
through 12/31/94 +16.33 +15.30
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 + 0.72% - 3.24%
Five Years Ended 12/31/94 +11.98 +11.98
Inception (3/27/87)
through 12/31/94 +11.61 +11.61
[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 -3.90% -4.84%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -3.79% -8.84%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
11/28/88--12/31/88 $ 9.61 $ 9.44 $0.257 $0.090 + 1.88%
1989 9.44 12.33 -- 0.211 +32.96
1990 12.33 12.20 0.130 -- + 0.03
1991 12.20 13.95 1.182 0.012 +25.20
1992 13.95 14.88 0.449 -- + 9.97
1993 14.88 17.48 2.122 -- +32.37
1994 17.48 17.49 0.295 -- + 1.77
1/1/95--1/31/95 17.49 17.33 -- -- - 0.91
------ ------
Total $4.435 Total $0.313
Cumulative total return as of 1/31/95: +149.00%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
3/27/87--12/31/87 $10.00 $ 8.49 $0.060 $0.187 -12.72%
1988 8.49 9.45 0.257 0.140 +16.04
1989 9.45 12.35 -- 0.084 +31.62
1990 12.35 12.09 0.130 -- - 1.02
1991 12.09 13.65 1.182 0.012 +23.85
1992 13.65 14.39 0.449 -- + 8.79
1993 14.39 16.65 2.122 -- +31.11
1994 16.65 16.47 0.295 -- + 0.72
1/1/95--1/31/95 16.47 16.30 -- -- - 1.03
------ ------
Total $4.495 Total $0.423
Cumulative total return as of 1/31/95: +132.36%**
<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>
PERFORMANCE DATA (concluded)
<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 Growth Fund Class A Shares* $17.33 $19.19 $18.92 -6.84%(1) -8.15%(1)
ML Growth Fund Class B Shares* 16.30 18.12 18.01 -7.85(1) -8.41(1)
ML Growth Fund Class C Shares* 16.30 18.12 17.45 -4.89(1) -8.41(1)
ML Growth Fund Class D Shares* 17.31 19.18 18.47 -4.67(1) -8.20(1)
Standard & Poor's 500 Index** 470.42 472.35 481.61 -2.32 -0.41
ML Growth Fund Class A Shares--Total Return* -6.84(1) -8.15(1)
ML Growth Fund Class B Shares--Total Return* -7.85(1) -8.41(1)
ML Growth Fund Class C Shares--Total Return* -4.89(1) -8.41(1)
ML Growth Fund Class D Shares--Total Return* -4.67(1) -8.20(1)
Standard & Poor's 500 Index--Total Return** +0.51 +0.31
<PAGE>
<FN>
*Investment results shown 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 $0.295 per share capital
gains distributions.
</TABLE>
PORTFOLIO INFORMATION
For the Quarter Ended January 31, 1995
Percent of
Ten Largest Equity Holdings Net Assets
Applied Materials, Inc. 6.4%
Autodesk, Inc. 5.5
Freeport-McMoRan, Inc. 4.7
Cirrus Logic, Inc. 4.6
Dell Computer Corp. 4.4
Safety-Kleen Corp. 4.4
Anadarko Petroleum Corp. 4.2
Cypress Semiconductor Corp. 4.2
Energy Service Co. 4.0
Valero Energy Corp. 3.9
Additions
Republic New York Corp.
United Meridian Corp.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Aviation 1,925,000 Aviall Inc. $ 29,309,996 $ 13,956,250 0.8%
Services
Banking & 1,000,000 Republic New York Corp. 44,267,281 47,625,000 2.6
Financial 1,000,000 Morgan Stanley Group, Inc. 52,103,330 60,125,000 3.3
Services 500,000 Safra Republic Holdings S.A. 27,112,500 41,000,000 2.3
-------------- ------------- ------
123,483,111 148,750,000 8.2
<PAGE>
Commercial 1,890,000 Dell Computer Corp. 43,638,441 80,088,750 4.4
Workstations & 195,000 Dell Computer Corp., Series A, 7%
Network Convertible Preferred Stock 19,375,000 34,710,000 1.9
Servers 3,000,000 Sequent Computer Systems, Inc. 49,705,321 48,000,000 2.7
-------------- ------------- ------
112,718,762 162,798,750 9.0
Computer 3,000,000 Autodesk, Inc. 60,626,791 99,000,000 5.5
Software 500,000 BMC Software, Inc. 22,178,439 28,500,000 1.6
1,600,000 Landmark Graphics Corp. 27,012,866 30,800,000 1.7
4,652,000 Mentor Graphics, Inc. 62,023,772 62,220,500 3.4
1,500,000 Wang Laboratories, Inc. 20,637,636 20,812,500 1.2
-------------- ------------- ------
192,479,504 241,333,000 13.4
Diversified 1,106,250 Freeport-McMoRan Copper & Gold, Inc. 27,008,364 22,678,125 1.3
Resource 5,000,000 Freeport-McMoRan, Inc. 93,436,071 85,625,000 4.7
Companies -------------- ------------- ------
120,444,435 108,303,125 6.0
Electronics 3,000,000 Cirrus Logic, Inc. 64,109,324 83,250,000 4.6
3,200,000 Cypress Semiconductor Corp. 37,671,569 75,200,000 4.2
-------------- ------------- ------
101,780,893 158,450,000 8.8
Forest 1,200,000 Weyerhaeuser Co. 52,183,239 45,450,000 2.5
Products
Healthcare 625,000 U.S. HealthCare, Inc. 1,001,345 28,437,500 1.6
Services
Natural Gas 2,343,750 Panhandle Eastern Corp. (c) 24,371,330 49,218,750 2.7
Gathering & 2,466,000 Western Gas Resources, Inc. 56,724,013 44,388,000 2.5
Transmission -------------- ------------- ------
81,095,343 93,606,750 5.2
Oil & Gas 2,000,000 Anadarko Petroleum Corp. 63,722,686 76,500,000 4.2
Exploration & 2,000,000 Devon Energy Corp. 30,708,630 34,000,000 1.9
Production 300,000 McMoRan Oil & Gas Co. (a) 1,691,662 787,500 0.0
6,500,000 Santa Fe Energy Resources, Inc. 58,769,857 55,250,000 3.1
1,000,000 United Meridian Corp. 12,390,789 11,375,000 0.6
3,000,000 YPF S.A.--Sponsored (ADR)(b) 76,151,413 61,875,000 3.4
-------------- ------------- ------
243,435,037 239,787,500 13.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Oil Refining 4,000,000 Valero Energy Corp. $ 86,245,282 $ 70,000,000 3.9%
Oil Services 6,000,000 Energy Service Co. 66,189,856 71,250,000 4.0
15,000,000 Global Marine, Inc. 52,723,823 56,250,000 3.1
1,335,000 Pool Energy Services Co. 14,336,959 10,346,250 0.6
-------------- ------------- ------
133,250,638 137,846,250 7.7
Pollution 5,000,000 Safety-Kleen Corp. 98,190,960 78,750,000 4.4
Control
Scientific & 2,500,000 Convex Computer Corp. 29,264,447 19,062,500 1.1
Technical
Computing
Systems
Semiconductor 3,000,000 Applied Materials, Inc. 20,777,384 114,750,000 6.4
Production
Equipment
Steel 600,000 Nucor Corp. 6,682,970 30,600,000 1.7
Total Stocks 1,432,343,346 1,691,881,625 93.9
<CAPTION>
Face
Amount Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial $66,775,000 General Electric Capital Corp.,
Paper* 5.80% due 2/01/1995 66,775,000 66,775,000 3.7
25,000,000 Matterhorn Capital Corp.,
5.64% due 2/13/1995 24,953,000 24,953,000 1.4
20,000,000 PHH Corp., 5.85% due 2/23/1995 19,928,500 19,928,500 1.1
Total Short-Term Securities 111,656,500 111,656,500 6.2
Total Investments $1,543,999,846 1,803,538,125 100.1
==============
Liabilities in Excess of Other Assets (1,647,060) (0.1)
--------------
Net Assets $1,801,891,065 100.0%
==============
<PAGE>
Net Asset Class A--Based on net assets of $380,907,181 and
Value: 21,984,740 shares of beneficial interest outstanding $ 17.33
==============
Class B--Based on net assets of $1,339,987,790 and
82,206,504 shares of beneficial interest outstanding $ 16.30
==============
Class C--Based on net assets of $9,909,223 and
607,915 shares of beneficial interest outstanding $ 16.30
==============
Class D--Based on net assets of $71,086,871 and
4,106,903 shares of beneficial interest outstanding $ 17.31
==============
<FN>
*Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the
Fund.
(a)Received as a spin-off from Freeport-McMoRan, Inc.
(b)American Depositary Receipts (ADR).
(c)Formerly known as Associated Natural Gas Corp.
</TABLE>
