MERRILL LYNCH
GROWTH FUND
FUND LOGO
Annual Report
October 31, 1997
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
Growth Fund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
<PAGE>
MERRILL LYNCH GROWTH FUND
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.
Fiscal Year in Review
For the 12-month period ended October 31, 1997, Merrill Lynch Growth
Fund's Class A, Class B, Class C and Class D Shares had total
investment returns of +34.03%, +32.62%, +32.63% and +33.67%,
respectively, compared to a +32.09% total return for the unmanaged
Standard & Poor's 500 Composite Index. (Fund results do not reflect
sales charges, and would be lower if sales charges were included.
Complete performance information, including average annual total
returns, can be found on pages 3--6 of this report to shareholders.)
The Fund's outperformance for the fiscal year relative to the S&P
500 was largely driven by the strength of the Fund's energy-related
investments. For the past two years, energy has been the Fund's
largest sector, representing 52.3% of net assets as of October 31,
1997.
<PAGE>
By way of review for our longer-term investors--and as an
introduction for new investors--with this annual report to
shareholders, we would like to discuss the key attributes of our
investment style that we believe differentiates Merrill Lynch Growth
Fund from its peers. With that in mind, we should start by stating
that Merrill Lynch Growth Fund has always maintained a relatively
concentrated list of portfolio holdings. At present, the Fund has 40
individual holdings with the top ten holdings representing over 40%
of net assets. This is not unusual; in fact, at times during the
Fund's ten-year history, the top ten holdings have exceeded 50% of
net assets.
A second distinguishing characteristic of the Fund's investment
approach derives from our investment time horizon. Specifically, the
Fund considers the return potential of prospective investments
within the context of a three-year--five-year investment time
horizon. One measure of this investment discipline is evidenced in
the Fund's annual portfolio turnover, which has averaged about 24%
over the Fund's ten-year history. This implies an average holding
period in excess of four years. A typical growth fund may have
portfolio turnover approaching 100%, implying around a one-year
investment horizon.
With these two investment attributes in mind, we believe that we add
value through our "bottom up" stock selection. From one perspective,
the Fund does not trade stocks to generate short-term profits.
Instead, we invest in businesses with the goal of delivering
superior long-term rates of return for our shareholders. This
distinction is important to keep in mind, since the Fund's short-
term returns generally do not track those of the broader stock
market.
Merrill Lynch Growth Fund October 31, 1997
Fiscal 1997 provides a good example of how we think we add value
through our stock selection and longer-term perspective. As our long-
term investors may recall, the Fund has been a significant energy
investor for a number of years. In the spring of 1997, following a
relatively mild North American winter, oil and gas prices weakened
seasonally and energy-related investments underperformed the broader
market. The underperformance of the energy sector negatively
impacted the Fund's relative performance for the first half of the
fiscal year. The Fund's underperformance was especially pronounced
as the broader market averages surged to new highs.
As we have outlined in previous letters to shareholders, we believe
that the energy sector is in the early stages of a secular revival
following a 15-year period of excess capacity. Through the course of
this year, revenue and earnings for Fund holdings in this sector
have grown markedly as industry supply and demand have moved back
toward equilibrium. This improvement in business fundamentals fueled
superior equity price returns for stocks in the energy sector in the
second half of the fiscal year and, as we have already noted, is
largely responsible for the Fund's positive relative performance for
the year.
<PAGE>
Consequently, while there will be periods of stock market volatility
that may negatively impact the Fund's concentrated list of holdings,
over the Fund's investment time horizon we try to add value for our
shareholders by investing with a longer view. Fiscal 1997 provides a
good example where short-term stock market trading patterns in
energy stocks overly discounted the impact of a mild winter on
energy demand. With a positive secular trend in place, investors
with a longer-term perspective may find values in well-positioned
businesses.
Portfolio Matters
We made no significant changes to the portfolio during the October
quarter. The Fund continues to have an important exposure to the
real estate investment trust (REIT) sector, which made up 14.5% of
net assets at the end of the quarter.
In our last two reports to shareholders, we discussed the secular
opportunity afforded well-positioned REITs, as institutional
investors with direct investment in specific real estate assets
transition their ownership to the public sector. There was further
evidence of this trend during the October quarter as one of our REIT
holdings, Simon DeBartolo Group, Inc., acquired Retail Property
Trust, a privately held regional mall REIT owned by institutional
investors, in a transaction valued at $1.5 billion.
In another important development in the REIT sector during the
October quarter, Equity Office Properties Trust (EOP) and Beacon
Properties Corp., both Fund holdings, reached a definitive agreement
to merge. The new entity will be the largest public office REIT and
is likely to enjoy significant economies of scale relative to many
of its public peers. EOP is the sister company of Equity Residential
Properties Trust (EQR), also a Fund holding. We believe that EOP is
likely to become a consolidating force in the office sector in the
same manner as EQR has been in the residential sector. The new EOP
will have the critical mass and geographic scope that we believe
will be very attractive to institutional holders of office
properties looking to securitize their real estate holdings for
shares of a public REIT.
In Conclusion
We thank you for your investment in Merrill Lynch Growth Fund, and
we look forward to serving your investment needs throughout the
Fund's new fiscal year and beyond.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen C. Johnes)
Stephen C. Johnes
Vice President and Portfolio Manager
December 1, 1997
Merrill Lynch Growth Fund 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:
* 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 approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
<PAGE>
* 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).
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.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
10/31/97 7/31/97 10/31/96 % Change % Change
<S> <C> <C> <C> <C>
ML Growth Fund Class A Shares* $33.13 $30.59 $26.87 +29.98%(1) +8.30%
ML Growth Fund Class B Shares* 30.63 28.36 25.03 +29.50(1) +8.00
ML Growth Fund Class C Shares* 30.43 28.18 24.89 +29.43(1) +7.98
ML Growth Fund Class D Shares* 33.01 30.51 26.79 +29.91(1) +8.19
Standard & Poor's 500 Index** 914.62 954.29 705.27 +29.68 -4.16
ML Growth Fund Class A Shares--Total Return* +34.03(2) +8.30
ML Growth Fund Class B Shares--Total Return* +32.62(3) +8.00
ML Growth Fund Class C Shares--Total Return* +32.63(4) +7.98
ML Growth Fund Class D Shares--Total Return* +33.67(5) +8.19
Standard & Poor's 500 Index--Total Return** +32.09 -3.73
<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.
(1)Percent change includes reinvestment of $1.394 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.858 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.616 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.630 per share ordinary
income dividends and $1.394 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.795 per share ordinary
income dividends and $1.394 per share capital gains distributions.
</TABLE>
<PAGE>
Merrill Lynch Growth Fund October 31, 1997
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 and the S&P 500 Total Return Index.
Beginning and ending values are:
11/28/88** 10/97
ML Growth Fund++--
Class A Shares* $ 9,475 $54,087
S&P 500 Total Return Index++++ $10,000 $43,886
A line graph depicting the growth of an investment in the
Fund's Class B Shares and the S&P 500 Total Return Index.
Beginning and ending values are:
10/87 10/97
ML Growth Fund++--
Class B Shares* $10,000 $58,183
S&P 500 Total Return Index++++ $10,000 $48,824
A line graph depicting the growth of an investment in the
Fund's Class C & Class D Shares and the S&P 500 Total Return Index.
Beginning and ending values are:
10/21/94** 10/97
ML Growth Fund++--
Class C Shares* $10,000 $21,193
ML Growth Fund++--
Class D Shares* $ 9,475 $20,559
S&P 500 Total Return Index++++ $10,000 $21,059
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Growth Fund invests in a non-diversified portfolio of equity
securities placing principal emphasis on those securities which the
Fund's management believes to be undervalued.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
Merrill Lynch Growth Fund October 31, 1997
PERFORMANCE DATA (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +47.51% +39.77%
Five Years Ended 9/30/97 +27.31 +25.95
Inception (11/28/88)
through 9/30/97 +22.07 +21.33
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +46.01% +42.01%
Five Years Ended 9/30/97 +26.01 +26.01
Ten Years Ended 9/30/97 +17.70 +17.70
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/97 +46.04% +45.04%
Inception (10/21/94)
through 9/30/97 +30.05 +30.05
[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*
Year Ended 9/30/97 +47.15% +39.42%
Inception (10/21/94)
through 9/30/97 +31.06 +28.68
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<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
1995 17.49 21.80 1.723 0.359 +36.82
1996 21.80 26.13 1.394 0.708 +29.72
1/1/97--10/31/97 26.13 33.13 -- 0.273 +27.98
------ ------
Total $7.552 Total $1.653
Cumulative total return as of 10/31/97: +470.80%*
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<PAGE>
Merrill Lynch Growth Fund October 31, 1997
PERFORMANCE DATA (concluded)
<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
1995 16.47 20.40 1.723 0.143 +35.45
1996 20.40 24.28 1.394 0.485 +28.38
1/1/97--10/31/97 24.28 30.63 -- 0.152 +26.87
------ ------
Total $7.612 Total $1.203
Cumulative total return as of 10/31/97: +417.96%*
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not reflect deduction of any sales charge; results would
be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid++ % Change*
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $17.45 $16.47 $0.295 -- - 3.90%
1995 16.47 20.30 1.723 $0.239 +35.44
1996 20.30 24.13 1.394 0.498 +28.34
1/1/97--10/31/97 24.13 30.43 -- 0.162 +26.87
------ ------
Total $3.412 Total $0.899
Cumulative total return as of 10/31/97: +111.93%*
<PAGE>
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not reflect deduction of any sales charge; results would
be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid++ % Change*
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $18.47 $17.47 $0.295 -- - 3.79%
1995 17.47 21.76 1.723 $0.321 +36.52
1996 21.76 26.07 1.394 0.650 +29.39
1/1/97--10/31/97 26.07 33.01 -- 0.242 +27.68
------ ------
Total $3.412 Total $1.213
Cumulative total return as of 10/31/97: +117.00%*
<FN>
++Figures may include short-term capital gains distributions.
*Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Held/ Value Percent of
Industries Face Amount Long-Term Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Banking & Financial 1,000,000 Republic New York Corp. $ 44,267,281 $ 105,812,500 1.3%
Services 2,000,000 Safra Republic Holdings S.A. (ADR)* 69,529,500 208,000,000 2.4
-------------- -------------- ------
113,796,781 313,812,500 3.7
Canadian 8,000,000 Norcen Energy Resources, Ltd. (c) 120,353,892 180,308,085 2.1
Exploration &
Production
<PAGE>
Diversified Resource 6,000,000 Freeport-McMoRan Copper & Gold, Inc.
Companies (Class A) (c) 156,119,558 138,375,000 1.6
5,000,000 Freeport-McMoRan Copper & Gold, Inc.
(Class B) (c) 107,984,584 119,375,000 1.4
3,750,000 Freeport-McMoRan, Inc. (c) 114,789,644 127,968,750 1.5
8,000,000 IMC Global, Inc. (c) 273,877,204 269,500,000 3.2
-------------- -------------- ------
652,770,990 655,218,750 7.7
Domestic 7,000,000 Burlington Resources, Inc. (c) 336,647,444 342,562,500 4.0
Exploration & 3,500,000 Vastar Resources, Inc. 106,578,685 141,312,500 1.7
Production -------------- -------------- ------
443,226,129 483,875,000 5.7
Electronic $133,500,000 Cirrus Logic, Inc. (Convertible Bond),
Components 6% due 12/15/2003 (b) 123,411,250 117,646,875 1.4
3,500,000 ++Komag, Inc. (c) 72,539,664 60,156,250 0.7
-------------- -------------- ------
195,950,914 177,803,125 2.1
Energy 8,000,000 Apache Corp. (c) 232,123,043 336,000,000 3.9
Acquisition & 2,200,000 Devon Energy Corp. (c) 34,401,130 98,450,000 1.2
Exploitation 1,000,000 Devon Financing Trust
(Convertible Preferred)(b) 50,000,000 80,500,000 0.9
4,000,000 ++Newfield Exploration Co. (c) 56,598,373 108,500,000 1.3
-------------- -------------- ------
373,122,546 623,450,000 7.3
Miscellaneous 1,000,000 ++Affymetrix, Inc. 16,662,627 36,125,000 0.4
2,763,558 ++CytoTherapeutics, Inc. (c) 18,945,059 14,508,680 0.2
434,500 CytoTherapeutics, Inc. (Warrants)(a) 651,750 31,718 0.0
1,665,000 ++Genset (ADR)* 32,285,401 30,594,375 0.3
780,000 ++Pharmacopeia, Inc. 14,903,780 13,747,500 0.2
1,000,000 RAO Gazprom (ADR)*(b) 17,865,451 22,375,000 0.3
261,000 ++Unova, Inc. 5,113,174 4,893,750 0.0
-------------- -------------- ------
106,427,242 122,276,023 1.4
Natural Gas 3,855,434 ++TransMontaigne Oil Co. (c) 27,060,669 66,506,236 0.8
Gathering & 3,500,000 Western Gas Resources, Inc. (c) 74,549,278 86,406,250 1.0
Transmission -------------- -------------- ------
101,609,947 152,912,486 1.8
Offshore Drilling 18,400,000 Ensco International, Inc. (c) 194,651,449 773,950,000 9.1
Companies 16,300,000 ++Global Marine, Inc. (c) 59,126,323 507,337,500 5.9
1,899,200 Santa Fe International Corp. 69,954,258 93,416,900 1.1
-------------- -------------- ------
323,732,030 1,374,704,400 16.1
<PAGE>
Oilfield Services 7,000,000 ++Nabors Industries, Inc. (c) 90,192,970 287,875,000 3.4
5,000,000 Schlumberger Ltd., Inc. 223,527,267 437,500,000 5.1
5,000,000 Tidewater, Inc. (c) 206,165,358 328,437,500 3.8
4,600,000 ++Weatherford Enterra, Inc. 135,307,975 234,887,500 2.8
3,833,400 ++Western Atlas, Inc. (c) 232,388,888 330,391,163 3.9
-------------- -------------- ------
887,582,458 1,619,091,163 19.0
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industries Shares Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Personal Computers 500,000 ++Dell Computer Corp. $ 3,107,425 $ 40,062,500 0.5%
Real Estate 5,400,000 Beacon Properties Corp. (c) 178,620,085 227,475,000 2.6
Investment 4,920,000 Crescent Real Estate Equities, Inc. (c) 124,669,501 177,120,000 2.1
Trusts--Office 2,733,700 Equity Office Properties Trust 74,868,096 83,548,706 1.0
-------------- -------------- ------
378,157,682 488,143,706 5.7
Real Estate 2,000,000 Avalon Properties, Inc. (c) 52,951,219 58,750,000 0.7
Investment 5,500,000 Equity Residential Properties Trust (c) 241,098,763 277,750,000 3.2
Trusts--Residential -------------- -------------- ------
294,049,982 336,500,000 3.9
Real Estate 3,742,000 Federal Realty Investment Trust (c) 102,967,307 94,719,375 1.1
Investment 945,000 New Plan Realty Trust 22,693,960 22,561,875 0.3
Trusts--Retail 7,411,600 Simon DeBartolo Group, Inc. (c) 222,820,235 229,296,375 2.7
1,727,200 Weingarten Realty Investors 71,733,539 68,764,150 0.8
-------------- -------------- ------
420,215,041 415,341,775 4.9
Total Long-Term Investments 4,414,103,059 6,983,499,513 81.9
Face
Amount Short-Term Investments
<PAGE>
Commercial $30,000,000 Aesop Funding Corp., 5.53%
Paper** due 11/06/1997 29,976,958 29,976,958 0.3
50,000,000 American Home Products Corp.,
5.50% due 12/12/1997 49,686,806 49,686,806 0.6
Atlantic Asset Securitization Corp.:
28,257,000 5.53% due 11/13/1997 28,204,913 28,204,913 0.3
12,073,000 5.54% due 11/13/1997 12,050,705 12,050,705 0.1
50,000,000 Bell Atlantic Financial Services, Inc.,
5.54% due 11/07/1997 49,953,833 49,953,833 0.6
40,000,000 CSW Credit, Inc., 5.53% due 11/04/1997 39,981,567 39,981,567 0.5
Centric Capital Corp.:
29,200,000 5.55% due 11/13/1997 29,145,980 29,145,980 0.3
58,500,000 5.54% due 11/21/1997 58,319,950 58,319,950 0.7
Clipper Receivables Corp.:
24,363,000 5.52% due 11/06/1997 24,344,322 24,344,322 0.3
25,000,000 5.52% due 11/19/1997 24,931,000 24,931,000 0.3
Corporate Asset Funding Co., Inc.:
50,000,000 5.50% due 11/25/1997 49,816,667 49,816,667 0.6
35,000,000 5.50% due 12/15/1997 34,764,722 34,764,722 0.4
50,000,000 Corporate Receivables Corp., 5.52% due
12/11/1997 49,693,333 49,693,333 0.6
Countrywide Home Loans, Inc.:
40,000,000 5.57% due 12/04/1997 39,795,767 39,795,767 0.5
20,000,000 5.53% due 12/05/1997 19,895,544 19,895,544 0.2
28,890,000 Falcon Asset Securization Corp., 5.51%
due 11/10/1997 28,850,204 28,850,204 0.3
Finova Capital Corp.:
15,000,000 5.53% due 11/14/1997 14,970,046 14,970,046 0.2
20,000,000 5.57% due 11/21/1997 19,938,111 19,938,111 0.2
Fleet Funding Corp.:
50,000,000 5.52% due 11/26/1997 49,808,333 49,808,333 0.6
38,068,000 5.53% due 12/04/1997 37,875,027 37,875,027 0.4
39,530,000 GTE Corp., 5.50% due 11/17/1997 39,433,371 39,433,371 0.5
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Value Percent of
Face Amount Short-Term Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial General Motors Acceptance Corp.:
Paper** $10,116,000 5.75% due 11/03/1997 $ 10,112,769 $ 10,112,769 0.1%
(concluded) 70,000,000 5.51% due 12/02/1997 69,667,868 69,667,868 0.8
50,000,000 Goldman Sachs Group, L.P., 5.53%
due 11/24/1997 49,823,347 49,823,347 0.6
International Securitization Corp.:
50,000,000 5.52% due 11/18/1997 49,869,667 49,869,667 0.6
50,000,000 5.56% due 12/04/1997 49,745,167 49,745,167 0.6
Lexington Parker Capital Corp.:
30,212,000 5.54% due 11/03/1997 30,202,701 30,202,701 0.3
25,224,000 5.54% due 11/14/1997 25,173,538 25,173,538 0.3
50,000,000 5.55% due 11/20/1997 49,853,542 49,853,542 0.6
Morgan (J.P.) & Co., Inc.:
50,000,000 5.50% due 12/19/1997 49,633,333 49,633,333 0.6
50,000,000 5.50% due 12/23/1997 49,602,778 49,602,778 0.6
Morgan Stanley Group, Inc.:
50,000,000 5.52% due 11/03/1997 49,984,667 49,984,667 0.6
50,000,000 5.50% due 11/21/1997 49,847,222 49,847,222 0.6
50,329,000 Motorola, Inc., 5.55% due 11/20/1997 50,181,578 50,181,578 0.6
41,150,000 Preferred Receivables Funding Corp.,
5.52% due 11/12/1997 41,080,594 41,080,594 0.5
20,000,000 Riverwoods Funding Corp., 5.50%
due 11/10/1997 19,972,500 19,972,500 0.2
Three Rivers Funding Corp.:
14,054,000 5.53% due 11/19/1997 14,015,141 14,015,141 0.2
20,104,000 5.58% due 12/02/1997 20,007,400 20,007,400 0.2
Transamerica Finance Corp.:
50,000,000 5.52% due 12/03/1997 49,754,667 49,754,667 0.6
50,000,000 5.54% due 12/08/1997 49,715,306 49,715,306 0.6
WCP Funding, Inc.:
25,000,000 5.53% due 11/07/1997 24,976,958 24,976,958 0.3
25,000,000 5.50% due 12/05/1997 24,870,139 24,870,139 0.3
-------------- -------------- ------
1,559,528,041 1,559,528,041 18.3
US Government Federal Home Loan Mortgage Corp.:
Agency 50,000,000 5.415% due 11/12/1997 49,917,271 49,917,271 0.6
Obligations** 20,000,000 5.465% due 12/17/1997 19,860,339 19,860,339 0.2
-------------- -------------- ------
69,777,610 69,777,610 0.8
Total Short-Term Investments 1,629,305,651 1,629,305,651 19.1
Total Investments $6,043,408,710 8,612,805,164 101.0
==============
Liabilities in Excess of Other Assets (85,944,173) (1.0)
-------------- ------
Net Assets $8,526,860,991 100.0%
============== ======
<PAGE>
<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)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and number of shares are
subject to adjustment under certain conditions until the expiration
date.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(c)Investment in an affiliated company (Note 5).
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$6,043,408,710) (Note 1a) $8,612,805,164
Cash 1,899,050
Receivables:
Beneficial interest sold $ 24,678,190
Dividends 4,728,075
Interest 3,461,692 32,867,957
--------------
Prepaid registration fees and other assets (Note 1f) 97,912
--------------
Total assets 8,647,670,083
--------------
Liabilities: Payables:
Securities purchased 96,798,153
Beneficial interest redeemed 11,693,168
Distributor (Note 2) 4,805,240
Investment adviser (Note 2) 4,503,028 117,799,589
--------------
Accrued expenses and other liabilities 3,009,503
--------------
Total liabilities 120,809,092
--------------
<PAGE>
Net Assets: Net assets $8,526,860,991
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 5,341,251
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 15,303,092
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 1,404,269
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 4,975,902
Paid-in capital in excess of par 5,374,548,046
Undistributed investment income--net 21,998,884
Undistributed realized capital gains on investments and foreign
currency transactions--net 533,893,093
Unrealized appreciation on investments--net 2,569,396,454
--------------
Net assets $8,526,860,991
==============
Net Asset Value: Class A--Based on net assets of $1,769,296,179 and 53,412,508 shares
of beneficial interest outstanding $ 33.13
==============
Class B--Based on net assets of $4,687,522,769 and 153,030,921 shares
of beneficial interest outstanding $ 30.63
==============
Class C--Based on net assets of $427,376,567 and 14,042,691 shares
of beneficial interest outstanding $ 30.43
==============
Class D--Based on net assets of $1,642,665,476 and 49,759,022 shares
of beneficial interest outstanding $ 33.01
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended October 31, 1997
<S> <S> <C> <C>
Investment Interest and discount earned $ 94,711,657
Income Dividends (net of $565,313 foreign withholding tax) 77,705,992
(Notes 1d & 1e): --------------
Total income 172,417,649
--------------
<PAGE>
Expenses: Investment advisory fees (Note 2) $ 42,880,246
Account maintenance and distribution fees--Class B (Note 2) 37,000,254
Transfer agent fees--Class B (Note 2) 5,578,287
Account maintenance fees--Class D (Note 2) 3,109,660
Account maintenance and distribution fees--Class C (Note 2) 2,898,334
Transfer agent fees--Class A (Note 2) 1,812,916
Transfer agent fees--Class D (Note 2) 1,657,466
Registration fees (Note 1f) 922,577
Transfer agent fees--Class C (Note 2) 472,982
Printing and shareholder reports 365,841
Accounting services (Note 2) 361,942
Custodian fees 203,791
Professional fees 80,175
Trustees' fees and expenses 45,576
Pricing fees 1,544
Other 53,416
--------------
Total expenses before reimbursement 97,445,007
Reimbursement of expenses (Note 2) (2,673,480)
--------------
Total expenses after reimbursement 94,771,527
--------------
Investment income--net 77,646,122
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 533,893,531
(Loss) on Foreign currency transactions--net (59,658) 533,833,873
Investments & --------------
Foreign Currency Change in unrealized appreciation on investments--net 1,320,593,787
Transactions --------------
(Notes 1b, 1c, Net realized and unrealized gain on investments and foreign
1e & 3): currency transactions 1,854,427,660
--------------
Net Increase in Net Assets Resulting from Operations $1,932,073,782
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 77,646,122 $ 24,902,813
Realized gain on investments and foreign currency
transactions--net 533,833,873 366,995,445
Change in unrealized appreciation on investments--net 1,320,593,787 622,793,812
-------------- --------------
Net increase in net assets resulting from operations 1,932,073,782 1,014,692,070
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (20,060,922) (11,466,384)
Shareholders Class B (27,296,782) (3,656,501)
(Note 1g): Class C (2,319,545) (670,606)
Class D (15,879,973) (8,536,028)
Realized gain on investments--net:
Class A (72,708,025) (54,826,992)
Class B (214,744,463) (168,933,574)
Class C (14,376,468) (7,976,874)
Class D (65,179,339) (51,112,182)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (432,565,517) (307,179,141)
-------------- --------------
Beneficial Net increase in net assets derived from beneficial
Interest interest transactions 1,933,943,957 1,095,437,782
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 3,433,452,222 1,802,950,711
Beginning of year 5,093,408,769 3,290,458,058
-------------- --------------
End of year* $8,526,860,991 $5,093,408,769
============== ==============
<FN>
*Undistributed investment income--net (Note 1h) $ 21,998,884 $ 9,982,308
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
<PAGE>
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 October 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 26.87 $ 23.13 $ 19.19 $ 19.22 $ 14.79
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .53 .31 .23 .08 .02
Realized and unrealized gain on
investments and foreign currency
transactions--net 7.98 5.63 4.01 2.01 4.86
---------- ---------- ---------- ---------- ----------
Total from investment
operations 8.51 5.94 4.24 2.09 4.88
---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.44) (.35) -- -- --
Realized gain on
investments--net (1.81) (1.85) (.30) (2.12) (.45)
---------- ---------- ---------- ---------- ----------
Total dividends
and distributions (2.25) (2.20) (.30) (2.12) (.45)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 33.13 $ 26.87 $ 23.13 $ 19.19 $ 19.22
========== ========== ========== ========== ==========
Total Investment Based on net asset
Return:* value per share 34.03% 28.15% 22.60% 12.50% 33.97%
========== ========== ========== ========== ==========
Ratios to Expenses, net of reimbursement .77% .80% .82% .82% .81%
Average ========== ========== ========== ========== ==========
Net Assets: Expenses .81% .84% .84% .82% .81%
========== ========== ========== ========== ==========
Investment income--net 1.84% 1.28% 1.10% .44% .29%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $1,769,296 $1,056,870 $ 670,164 $ 382,077 $ 229,709
========== ========== ========== ========== ==========
Portfolio turnover 24.75% 30.01% 37.42% 4.22% 33.21%
========== ========== ========== ========== ==========
Average commission
rate paid++++ $ .0559 $ .0539 -- -- --
========== ========== ========== ========== ==========
<PAGE>
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average number of shares outstanding during the year.
++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
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 October 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994++ 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 25.03 $ 21.60 $ 18.12 $ 18.43 $ 14.35
Performance: ---------- ---------- ---------- ---------- ----------
Investment income (loss)--net .22 .06 .01 (.10) (.11)
Realized and unrealized gain on
investments and foreign currency
transactions--net 7.39 5.26 3.77 1.91 4.64
---------- ---------- ---------- ---------- ----------
Total from investment
operations 7.61 5.32 3.78 1.81 4.53
---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.20) (.04) -- -- --
Realized gain on
investments--net (1.81) (1.85) (.30) (2.12) (.45)
---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (2.01) (1.89) (.30) (2.12) (.45)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 30.63 $ 25.03 $ 21.60 $ 18.12 $ 18.43
========== ========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset
Return:* value per share 32.62% 26.84% 21.37% 11.41% 32.54%
========== ========== ========== ========== ==========
<PAGE>
Ratios to Average Expenses, net of reimbursement 1.79% 1.82% 1.84% 1.84% 1.83%
Net Assets: ========== ========== ========== ========== ==========
Expenses 1.83% 1.85% 1.87% 1.84% 1.83%
========== ========== ========== ========== ==========
Investment income (loss)--net .82% .26% .04% (.58%) (.78%)
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $4,687,523 $2,916,507 $1,920,451 $1,433,051 $1,049,190
========== ========== ========== ========== ==========
Portfolio turnover 24.75% 30.01% 37.42% 4.22% 33.21%
========== ========== ========== ========== ==========
Average commission
rate paid++++ $ .0559 $ .0539 -- -- --
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average number of shares outstanding during the year.
++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C++++
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 24.89 $ 21.59 $ 18.12 $ 17.45
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .22 .06 .03 --
Realized and unrealized gain on investments
and foreign currency transactions--net 7.34 5.23 3.74 .67
---------- ---------- ---------- ----------
Total from investment operations 7.56 5.29 3.77 .67
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.21) (.14) -- --
Realized gain on investments--net (1.81) (1.85) (.30) --
---------- ---------- ---------- ----------
Total dividends and distributions (2.02) (1.99) (.30) --
---------- ---------- ---------- ----------
Net asset value, end of period $ 30.43 $ 24.89 $ 21.59 $ 18.12
========== ========== ========== ==========
Total Investment Based on net asset value per share 32.63% 26.84% 21.32% 3.84%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.80% 1.84% 1.86% 2.52%*
Net Assets: ========== ========== ========== ==========
Expenses 1.84% 1.87% 1.89% 2.52%*
========== ========== ========== ==========
Investment income (loss)--net .81% .25% .14% (1.17%)*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 427,377 $ 187,221 $ 85,486 $ 1,381
Data: ========== ========== ========== ==========
Portfolio turnover 24.75% 30.01% 37.42% 4.22%
========== ========== ========== ==========
Average commission rate paid++++++ $ .0559 $ .0539 -- --
========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average number of shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
<PAGE>
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D++++
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 26.79 $ 23.06 $ 19.18 $ 18.47
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .46 .24 .22 --
Realized and unrealized gain on investments
and foreign currency transactions--net 7.95 5.63 3.96 .71
---------- ---------- ---------- ----------
Total from investment operations 8.41 5.87 4.18 .71
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.38) (.29) -- --
Realized gain on investments--net (1.81) (1.85) (.30) --
---------- ---------- ---------- ----------
Total dividends and distributions (2.19) (2.14) (.30) --
---------- ---------- ---------- ----------
Net asset value, end of period $ 33.01 $ 26.79 $ 23.06 $ 19.18
========== ========== ========== ==========
Total Investment Based on net asset value per share 33.67% 27.83% 22.29% 3.84%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.02% 1.05% 1.08% 1.77%*
Net Assets: ========== ========== ========== ==========
Expenses 1.06% 1.08% 1.10% 1.77%*
========== ========== ========== ==========
Investment income (loss)--net 1.59% 1.03% 1.00% (.54%)*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $1,642,665 $ 932,811 $ 614,357 $ 1,186
Data: ========== ========== ========== ==========
Portfolio turnover 24.75% 30.01% 37.42% 4.22%
========== ========== ========== ==========
Average commission rate paid++++++ $ .0559 $ .0539 -- --
========== ========== ========== ==========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average number of shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted into US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Growth Fund (the "Fund") is registered under the
Investment Company Act of 1940 as a non-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.
<PAGE>
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Trustees as the
primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the
direction of the Fund's Board of Trustees.
(b) 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.
(c) 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 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.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on net
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
<PAGE>
* Options--The Fund is authorized to purchase and write covered call
options and put 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 purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the proceeds 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
premiums paid or received (or loss or gain to the extent the cost of
the closing transaction is less than or greater than the premium
paid or received).
Merrill Lynch Growth Fund October 31, 1997
NOTES TO FINANCIAL STATEMENTS (continued)
Written and purchased options are non-income producing investments.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Fund as unrealized gains or losses. When the
contract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
(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 dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined the ex-dividend date. Interest income is
recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
<PAGE>
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting for
foreign currency transactions. Accordingly, current year's permanent
book/tax differences of $72,324 have been reclassified between
undistributed net realized capital gains and undistributed net
investment income. These reclassifications have no effect on net
assets or net asset values per share.
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 & Co., Inc. ("ML & Co."), which is
the limited 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 is required to pay a monthly fee based upon the
average daily value of the Fund's net assets at an annual rate of
0.65%. As a result of a voluntary waiver of expenses beginning on
December 16, 1994, the Fund will pay 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 on the first $1
billion; 0.625% of the average net assets on the next $500 million;
and 0.60% of the average net assets over $1.5 billion. For the year
ended October 31, 1997, MLAM earned fees of $42,880,246, of which
$2,673,480 was voluntarily waived.
Pursuant to 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:
<PAGE>
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Merrill Lynch Growth Fund October 31, 1997
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 October 31, 1997, MLFD earned underwriting
discounts and direct commissions, 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 $ 14,470 $ 194,757
Class D $210,653 $2,860,415
For the year ended October 31, 1997, MLPF&S received contingent
deferred sales charges of $4,083,378 and $96,952 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $441,467 in commissions on the
execution of portfolio security trans-actions for the Fund for the
year ended October 31, 1997.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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 trustees of the Fund are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1997 were $2,836,110,242 and
$1,249,176,758, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $533,904,081 $2,569,396,454
Short-term investments (10,550) --
Foreign currency
transactions (59,658) --
------------ --------------
Total $533,833,873 $2,569,396,454
============ ==============
As of October 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $2,569,396,454, of which
$2,629,138,553 related to appreciated securities and $59,742,099
related to depreciated securities. At October 31, 1997, the
aggregate cost of investments for Federal income tax purposes was
$6,043,408,710.
4. Shares of Beneficial Interest:
Net increase in net assets derived from beneficial interest
transactions was $1,933,943,957 and $1,095,437,782 for the years
ended October 31, 1997 and October 31, 1996, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 26,024,620 $ 745,365,301
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,259,696 85,223,804
------------ --------------
Total issued 29,284,316 830,589,105
Shares redeemed (15,200,649) (431,634,274)
------------ --------------
Net increase 14,083,667 $ 398,954,831
============ ==============
<PAGE>
Class A Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 15,856,881 $ 374,683,538
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,825,668 60,826,440
------------ --------------
Total issued 18,682,549 435,509,978
Shares redeemed (8,325,117) (196,158,604)
------------ --------------
Net increase 10,357,432 $ 239,351,374
============ ==============
Merrill Lynch Growth Fund October 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares
For the Year Ended Dollar
October 31, 1997 Shares Amount
Shares sold 58,873,336 $1,555,413,648
Shares issued to shareholders
in reinvestment of dividends
and distributions 9,170,267 221,585,076
------------ --------------
Total issued 68,043,603 1,776,998,724
Automatic conversion of
shares (3,569,962) (96,367,617)
Shares redeemed (27,974,354) (736,256,154)
------------ --------------
Net increase 36,499,287 $ 944,374,953
============ ==============
Class B Shares
For the Year Ended Dollar
October 31, 1996 Shares Amount
Shares sold 40,931,339 $ 899,830,123
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,878,594 157,479,392
------------ --------------
Total issued 48,809,933 1,057,309,515
Automatic conversion of
shares (2,182,558) (47,330,262)
Shares redeemed (19,023,230) (416,714,283)
------------ --------------
Net increase 27,604,145 $ 593,264,970
============ ==============
<PAGE>
Class C Shares
For the Year Ended Dollar
October 31, 1997 Shares Amount
Shares sold 8,962,055 $ 238,396,273
Shares issued to shareholders
in reinvestment of dividends
and distributions 636,886 15,333,078
------------ --------------
Total issued 9,598,941 253,729,351
Shares redeemed (3,076,879) (81,814,832)
------------ --------------
Net increase 6,522,062 $ 171,914,519
============ ==============
Class C Shares
For the Year Ended Dollar
October 31, 1996 Shares Amount
Shares sold 4,661,344 $ 101,617,191
Shares issued to shareholders
in reinvestment of dividends
and distributions 396,953 7,905,015
------------ --------------
Total issued 5,058,297 109,522,206
Shares redeemed (1,496,367) (32,621,973)
------------ --------------
Net increase 3,561,930 $ 76,900,233
============ ==============
Class D Shares
For the Year Ended Dollar
October 31, 1997 Shares Amount
Shares sold 17,348,143 $ 497,504,347
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,769,334 72,205,886
Automatic conversion of
shares 3,317,532 96,367,617
------------ --------------
Total issued 23,435,009 666,077,850
Shares redeemed (8,490,489) (247,378,196)
------------ --------------
Net increase 14,944,520 $ 418,699,654
============ ==============
<PAGE>
Class D Shares
For the Year Ended Dollar
October 31, 1996 Shares Amount
Shares sold 8,855,195 $ 208,171,714
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,450,827 52,562,307
Automatic conversion of
shares 2,042,224 47,330,262
------------ --------------
Total issued 13,348,246 308,064,283
Shares redeemed (5,171,860) (122,143,078)
------------ --------------
Net increase 8,176,386 $ 185,921,205
============ ==============
Merrill Lynch Growth Fund October 31, 1997
<TABLE>
5. Transactions with Affiliated Companies:
Investment in companies 5% or more of whose outstanding securities
are held by the Fund (such companies are defined as "Affiliated
Companies" in Section 2(a)(3) of the Investment Company Act of 1940)
are as follows:
<CAPTION>
Increase in Increase in Dividend
Industry Affiliate Shares--Net Cost--Net Income
<S> <S> <C> <C> <C>
Energy Acquisition & Exploitation Apache Corp. -- -- $ 2,240,000
Real Estate Investment Trusts-- Avalon Properties, Inc. 2,000,000 $ 52,951,219 3,060,000
Residental
Real Estate Investment Trusts--Office Beacon Properties Corp. 5,400,000 178,620,085 5,983,750
Domestic Exploration & Production Burlington Resources, Inc. 7,000,000 336,647,444 825,000
Real Estate Investment Trusts--Office Crescent Real Estate Equities, Inc. 4,920,000 124,669,501 12,897,949
Miscellaneous CytoTherapeutics, Inc. 467,558 3,030,276 ++
Energy Acquisition & Exploitation Devon Energy Corp. -- -- 440,000
Offshore Drilling Companies Ensco International, Inc. 11,100,000 89,012,097 460,000
<PAGE>
Real Estate Investment Trusts-- Equity Residental Properties Trust 5,500,000 241,098,763 11,474,000
Residental
Real Estate Investment Trusts--Retail Federal Realty Investment Trust 3,742,000 102,967,307 4,266,400
Diversified Resource Companies Freeport-McMoRan Copper &
Gold, Inc. (Class A) 4,500,000 119,670,007 2,216,475
Diversified Resource Companies Freeport-McMoRan Copper &
Gold, Inc. (Class B) -- -- 4,500,000
Diversified Resource Companies Freeport-McMoRan, Inc. -- -- 1,350,000
Offshore Drilling Companies Global Marine, Inc. -- -- ++
Diversified Resource Companies IMC Global, Inc. 6,950,000 236,654,280 1,140,000
Electronic Components Komag, Inc. -- -- ++
Oilfield Services Nabors Industries, Inc. 2,000,000 34,491,905 ++
Energy Acquisition & Exploitation Newfield Exploration Co. 2,000,000 -- ++
Canadian Exploration & Production Norcen Energy Resources, Ltd. -- -- 732,864
Real Estate Investment Trusts--Retail Simon DeBartolo Group, Inc. 7,411,600 222,820,235 8,567,775
Oilfield Services Tidewater, Inc. 5,000,000 206,165,358 1,200,000
Natural Gas Gathering & Transmission TransMontaigne Oil Co. 738,434 9,917,169 ++
Oilfield Services Western Atlas, Inc. 1,333,400 91,214,635 ++
Natural Gas Gathering & Transmission Western Gas Resources, Inc. 1,000,000 17,229,850 700,000
<FN>
++Non-income producing security.
Merrill Lynch Growth Fund October 31, 1997
<PAGE>
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
Merrill Lynch Growth Fund:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Growth Fund as of October 31, 1997, 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 October
31, 1997 by correspondence with the custodian and brokers or other
alternative procedures. 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.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Growth Fund as of October 31, 1997, 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
December 5, 1997
</AUDIT-REPORT>
<PAGE>
</TABLE>
<TABLE>
IMPORTANT TAX INFORMATION (UNAUDITED)
<CAPTION>
The following information summarizes all per share distributions
paid by Merrill Lynch Growth Fund during its taxable year ended
October 31, 1997:
Qualifying Non-Qualifying Total Long-Term
Record Payable Ordinary Ordinary Ordinary Capital
Date Date Income Income Income Gains
<S> <C> <C> <C> <C> <C> <C>
Class A Shares 12/17/96 12/26/96 $0.123815 $0.460542 $0.584357 $1.393567
7/02/97 7/11/97 $0.149826 $0.123661 $0.273487 --
Class B Shares 12/17/96 12/26/96 $0.098321 $0.365714 $0.464035 $1.393567
7/02/97 7/11/97 $0.083419 $0.068850 $0.152269 --
Class C Shares 12/17/96 12/26/96 $0.099266 $0.369229 $0.468495 $1.393567
7/02/97 7/11/97 $0.088489 $0.073035 $0.161524 --
Class D Shares 12/17/96 12/26/96 $0.117156 $0.435776 $0.552932 $1.393567
7/02/97 7/11/97 $0.132798 $0.109606 $0.242404 --
The qualifying ordinary income qualifies for the dividends received deduction for corporations.
Please retain this information for your records.
</TABLE>
Merrill Lynch Growth Fund October 31, 1997
PORTFOLIO INFORMATION (unaudited)
For the Quarter Ended October 31, 1997
Percent of
Ten Largest Equity Holdings Net Assets
Ensco International, Inc. 9.1%
Global Marine, Inc. 5.9
Schlumberger Ltd., Inc. 5.1
Burlington Resources, Inc. 4.0
Apache Corp. 3.9
Western Atlas, Inc. 3.9
Tidewater, Inc. 3.8
Nabors Industries, Inc. 3.4
Equity Residential Properties Trust 3.2
IMC Global, Inc. 3.2
<PAGE>
Additions
New Plan Realty Trust
Pharmacopeia, Inc.
Unova, Inc.
Deletions
Cirrus Logic, Inc.
Crescent Operating, Inc.
Monterey Resources, Inc.
Santa Fe Energy Resources, Inc.
Starwood Lodging Trust
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
James H. Bodurtha, 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
Arthur Moretti, Vice President
Gerald M. Richard, Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02171
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
