MERRILL LYNCH
GROWTH FUND
FUND LOGO
Quarterly Report
January 31, 1999
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
MERRILL LYNCH GROWTH FUND
DEAR SHAREHOLDER
With Merrill Lynch Growth Fund's new management team, we thought
that it would be appropriate to use this quarterly report to
shareholders to provide you with some insight about our investment
approach and what it will mean for the Fund in the months ahead. A
new investment approach inevitably brings with it a change in
portfolio holdings. Since we had just begun this portfolio
reconstruction as of January 31, 1999, we decided to forego a
schedule of investments in this report, since the Fund's actual
holdings are going to be quite different in the future than they
were in the past. We will again provide you with a complete schedule
of investments in our April 30, 1999 semi-annual report to
shareholders.
What Is a Growth Stock?
As we select investments for the Fund's portfolio, we expect to
broaden the Fund's historic focus and seek stocks that have stronger
growth characteristics. Our definition of growth is somewhat more
inclusive than simply those with earnings that are growing at an
above-average rate. In our view, a growth company is one whose
economic value is increasing at an above-average rate. Some of the
ways that economic value can be created are:
* Earnings growth.
* Cash flow growth.
* EBITDA growth (enterprise value/earnings before interest, taxes,
depreciation and amortization).
In addition, we may also judge a company that is increasing its
business substantially more than its competitors as a growth
company. For example, if a telecommunications company is signing on
more new customers than its peers, we might consider it as creating
economic value at an above-average rate, even though in the near
term this may penalize its earnings.
It is also important for shareholders to understand that we do not
define increasing economic value at an above-average rate in terms
of a specific number. For example, we do not strive to purchase
shares of companies with earnings growth of 15% a year or more. We
view "above average" as a relative, not an absolute, term.
Furthermore, the level of growth that we might expect from a
particular company would be related to relevant measures of the rate
of inflation. For example, in a 0% inflation environment in which
many companies are increasing economic value at a 5% annual rate, we
would consider a growth company to be one that is increasing
economic value at a 10% rate.
Portfolio Characteristics
In selecting investments, we take a bottom-up, fundamentally driven
investment approach. As a result, we expect that we usually will not
significantly overweight/underweight a particular sector or
industry. However, there will be those rare occasions when we
overweight/underweight a particular sector or industry based on our
bottom-up, fundamental research. In general, we expect that Merrill
Lynch Growth Fund's portfolio will be moderately concentrated in the
future. This means that we expect that over time the number of
stocks in the portfolio is likely to range from 40 to 50. In
addition, we would expect that the top ten holdings could constitute
30%--40% of the portfolio, with the next ten largest holdings
making up 20%--30% of the Fund. At the same time, we expect that we
will have relatively low portfolio turnover.
Merrill Lynch Growth Fund
January 31, 1999
Team Approach
The members of Merrill Lynch Growth Fund's portfolio management team
are profiled on page 4 of this report to shareholders. We believe
that these individuals possess the depth and breadth of experience
required to construct a portfolio of growth stocks with attractive
long-term return potential. This process will take some more time to
complete, and the Fund may be subject to more interim price declines
during this period. Although we cannot guarantee future results, we
hope to reward your investment in Merrill Lynch Growth Fund with
improved returns over the longer term.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
Executive Vice President
(Stephen I. Silverman)
Stephen I. Silverman
Senior Vice President and Portfolio Manager
March 8, 1999
Effective January 22, 1999, Stephen I. Silverman assumed the day-to-
day responsibilities for the management of Merrill Lynch Growth
Fund. Mr. Silverman has been a Portfolio Manager with Merrill Lynch
Asset Management, L.P. since 1983.
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.)
* 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 "Recent Performance
Results" and "Average Annual Total Return" 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.
Merrill Lynch Growth Fund
January 31, 1999
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Ten Years/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Growth Fund Class A Shares* -23.72% -10.12% +248.08%
ML Growth Fund Class B Shares* -24.52 -10.36 +214.03
ML Growth Fund Class C Shares* -24.53 -10.32 + 39.49
ML Growth Fund Class D Shares* -23.90 -10.15 + 44.29
Standard & Poor's 500 Index** +32.49 +16.86 +462.67/+200.44
<FN>
*Investment results shown do not reflect sales charges; results
would be lower if a sales charge was included. Total investment
returns are based on changes in net asset values for the periods
shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date. The Fund's
ten-year/since inception periods are Class A & Class B Shares, for
the ten years ended 1/31/99 and Class C & Class D Shares, from
10/21/94 to 1/31/99.
**An unmanaged broad-based index comprised of common stocks. Ten
years/since inception total returns are for the ten years ended
1/31/99 and from 10/21/94 to 1/31/99, respectively.
</TABLE>
Average Annual Total Return
PERFORMANCE DATA
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 -23.49% -27.51%
Five Years Ended 12/31/98 +10.40 + 9.22
Ten Years Ended 12/31/98 +14.80 +14.18
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 -24.23% -27.24%
Five Years Ended 12/31/98 + 9.28 + 9.28
Ten Years Ended 12/31/98 +13.62 +13.62
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 -24.25% -25.00%
Inception (10/21/94)
through 12/31/98 + 9.91 + 9.91
[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 12/31/98 -23.64% -27.65%
Inception (10/21/94)
through 12/31/98 +10.77 + 9.36
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Growth Fund
January 31, 1999
MERRILL LYNCH GROWTH FUND MANAGEMENT TEAM
Stephen I. Silverman, Portfolio Manager--Mr. Silverman has been the
manager of Merrill Lynch Pacific Fund, Inc. since he joined Merrill
Lynch Asset Management, L.P. (MLAM) in 1983, and has also managed
the Merrill Lynch Global Value Fund, Inc. since its inception in
October 1996. He is a graduate of Case Western Reserve University
and received an MBA in Accounting and Finance from the University of
Chicago.
Jacqueline Bell, CFA, Senior Fund Analyst--Ms. Bell joined MLAM as a
Senior Fund Analyst in September 1996. Previously, she was an Equity
Analyst at Harbor Capital Management, specializing in the healthcare
and telecommunications industries. She began her investment career
in 1989 at The Boston Company, where she was an Equity Analyst
covering the healthcare, media and entertainment groups. Ms. Bell
received a BA in History and Science from Harvard University in
1989, graduating magna cum laude, and was the recipient of the
Harvard College Scholarship and Agassiz Award for academic
achievement of high distinction, as well as a Radcliffe Science
Research Grant.
Lawrence Berman, CFA, Senior Fund Analyst--Prior to joining MLAM in
1996, Mr. Berman developed quantitative decision models in Merrill
Lynch's Management Science Group. Before joining Merrill Lynch in
1987, he held various technical staff positions in the
telecommunications and aerospace industries developing mathematical
models and software for planning, analysis and forecasting. He has
an AB in Mathematics from the University of California at Berkeley,
an MS in Electrical Engineering from the University of Illinois,
Urbana, and MS and PhD degrees in Engineering-Economic Systems from
Stanford University.
Gervaise R.J. Heddle, Senior Fund Analyst--Mr. Heddle joined MLAM in
1998 as a Senior Fund Analyst for Merrill Lynch Growth Fund.
Previously, he was the Senior Technology Analyst responsible for
establishing global technology coverage for BT Australia, the
country's leading investment manager. He has a Bachelors of
Economics with First Class Honors from the University of Adelaide,
Australia.
Walid Kassem, Senior Fund Analyst--Mr. Kassem joined MLAM in June
1996 as a Senior Fund Analyst. Previously, he spent three years as a
Senior Analyst at Sanford C. Bernstein, specializing in investing in
international technology companies. Prior to this association, he
spent 12 years in the telecommunications and computer industries in
various managerial and senior technical positions. Mr. Kassem has a
BS and a PhD in Electrical Engineering, a BS and an MS in
Mathematics, and an MBA with honors in Finance and Economics from
the University of Chicago.
Sajjad Ladiwala, CFA, Senior Fund Analyst--Mr. Ladiwala joined MLAM
in 1998 as a Senior Fund Analyst for Merrill Lynch Growth Fund.
Prior to this, he was responsible for valuation projects, fairness
opinions and solvency opinions on companies in a wide variety of
industries at Duff & Phelps LLC. Mr. Ladiwala received a Bachelor of
Commerce degree with First Class Honors in March 1987 from the
University of Bombay. He received an MBA degree from the University
of Michigan with emphasis in Finance and Corporate Strategy, and was
elected to Beta Gamma Sigma.
Marjorie Doyle Lyons, CFA, Senior Fund Analyst--Ms. Lyons began her
career at Merrill Lynch in 1977. She has held a variety of
analytical and management positions in the investment banking,
treasury and corporate strategy departments, with four years in
Merrill Lynch's sell-side equity research division. She attended
Wellesley College and received two degrees from the University of
Wisconsin: a BBA in Finance from the School of Business and an MS in
Finance from the Graduate School of Business, where she was elected
to Beta Gamma Sigma.
William Patzer, CFA, Senior Fund Analyst--Mr. Patzer joined MLAM as
a Senior Fund Analyst in September 1996. Prior to this, he was
responsible for the retailing, technology, electric utility and
transportation groups at Newbold Asset Management. Previously, he
spent more than six years in investment banking at Lehman Brothers.
Mr. Patzer received a BA in Theology and Biblical Studies from
Haverford College and was elected to Phi Beta Kappa. He also
received an MBA in Finance from Stanford University's Graduate
School of Business.
Brian Sattinger, CFA, Research Associate--Mr. Sattinger joined MLAM
in 1995 as a member of the operations team for Merrill Lynch Pacific
Fund. Mr. Sattinger received his BA in Economics from Rutgers
College in 1995. After receiving his CFA in 1998, he began working
as a Research Associate for Merrill Lynch Global Value Fund.
Merrill Lynch Growth Fund
January 31, 1999
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
Stephen I. Silverman, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Gerald M. Richard, Treasurer and Norman R. Harvey, Senior Vice
President of Merrill Lynch Growth Fund have recently retired. Their
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's
Board of Trustees in wishing Mr. Richard and Mr. Harvey well in
their retirements.
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
