MERRILL LYNCH
GROWTH FUND
FUND LOGO
Annual Report
October 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
For the quarter ended October 31, 1999, Merrill Lynch Growth Fund's
Class A, Class B, Class C and Class D Shares had total returns of
+7.61%, +7.39%, +7.34% and +7.55%, respectively. These returns
compare to a 2.90% appreciation for the unmanaged Standard & Poor's
(S&P) 500 Index and a 6.55% gain by the unmanaged S&P/Barra Growth
Index. Thus the October quarter witnessed a continuation of the
satisfactory performance that the Fund has achieved since we began
to restructure the Fund's portfolio in mid-February 1999. (Fund
results do not reflect sales charges, and would be lower if sales
charges were included. Complete performance information can be found
on pages 4--6 of this report to shareholders.)
Fiscal Year in Review
For the 12 months ended October 31, 1999, Merrill Lynch Growth
Fund's Class A, Class B, Class C and Class D Shares had total
returns of +3.09%, +2.06%, +2.04% and +2.82%, respectively.
Enhancing the Fund's performance for the year was our overweighting
in biotechnology stocks, which have all performed well. (We trimmed
these positions somewhat becuase of their extraordinary
appreciation.) In addition, our holdings in Texas Instruments Inc.,
Maxim Integrated Products, Inc., EMC Corp. and Clear Channel
Communications, Inc. positively impacted the Fund. On the negative
side, some of our investments underperformed significantly, most
recently Tyco International Ltd. and Global TeleSystems Group, Inc.
However, all in all the positives outweighed the negatives.
Investment Approach
We would like to better familiarize investors with our investment
approach and how we are comparing the Fund's performance. We invest
in companies (primarily US companies) that we consider growth
stocks. In our view, a growth stock is one that is growing some
measure of economic value creation at a rate that is appreciably
faster than the average company. The economic value creation growth
might be income, but it could also be revenues, number of
subscribers or number of licenses signed. Of course, we do not
invest in every growth company. On the other hand, we will not
invest in a company that does not fit our definition of a growth
company even if we find a company that we believe is clearly worth
more than it is selling for. We recognize that there is a potential
downside to this approach should some other type of stocks
outperform growth stocks.
The good news is that there are enough different types of companies
that are growing fast enough to meet our definition of growth. With
a relatively wide variety of companies in different industries to
choose from, we expect that some of our holdings will perform
relatively better should there be times when growth stocks
experience meaningful setbacks. We also hope that we will be
successful in buying shares of companies that are not only growing
now but continue to grow at a superior rate in the future. If we do
so, we hope to provide good investment returns even if our timing
(the price at which we buy) is not optimal. However, if "asset
plays," or stocks selling at low price/earnings ratios or high-yield
stocks, are the only ones performing well, then the Fund will
certainly not do well.
Merrill Lynch Growth Fund
October 31, 1999
The Fund will be modestly concentrated, but we strive to maintain a
broad exposure to industries and companies that we believe are fast-
growing. However, there will be some exciting growth areas that we
may choose to avoid because we believe they are simply too expensive
and all the positive developments are already reflected in share
prices.
We should note that the pace at which many stocks are currently
appreciating raises concerns that the market overall has taken on a
speculative tone. Many companies that now have market
capitalizations ranging from $5 billion to $20 billion only have a
few years' worth of operating experience, with no income and an
inconsequential level of current revenue. To be fair, many of these
companies are often technological business innovators in areas that
appear poised to experience extraordinary sustained growth. Examples
of this phenomenon are particularly notable in telecommunications,
especially optical networks, software and Internet-related
enterprises.
Some companies that are very well-run, large, well-entrenched and
fast-growing have appreciated so much that the investment community
must have concluded that their future growth will be much higher
than what it was assumed to have been as little as a few months ago.
Shares of companies such as Cisco Systems, Inc., Sun Microsystems,
Inc., Nortel Networks Corporation, QUALCOMM Inc. and JDS Uniphase
Corporation have all appreciated sharply thus far in 1999. These are
all now large companies, with profitable, rapidly growing
businesses. More surprising are the new companies whose market
capitalizations have become large very quickly, such as Sycamore
Networks, Inc., Juniper Networks, Inc. and Red Hat Inc. These
companies all went public this year with very short operating
histories, and most of their shares that are outstanding are still
not issued.
It may well be that these companies will do as well as their current
share prices suggest. However, these expectations may be higher than
those of the most knowledgeable insiders. For example, in the case
of Sycamore, the founders, investment bankers and venture
capitalists involved in the initial public offering had expected (as
late as October 1999) it to be priced $18--$20 per share. This would
have raised a total of $134.6 million--$149.5 million, with the
company's overall market capitalization reaching $1.34 billion--
$1.54 billion. We would expect that those closest to this public
offering were as surprised as anyone to find that at its conclusion
the company's market capitalization was $17 billion. We recognize
that Sycamore does appear to have a great management team, a great
product and a great future. However, it is unusual to find that
knowledgeable inside investors (including company management) and
the investing public at large would have such different assessments
of the company's value--and that outsiders would value it much more
highly than insiders.
Nevertheless, just because some companies have had spectacular stock
price appreciation does not mean that the overall stock market or
growth stocks in general are overvalued and will decline in price.
In fact, it is possible that growth stocks as a group will not
decline at all. In our view, most of these companies are growing
rapidly and have very high profitability along with prospects for
continued robust growth.
Merrill Lynch Growth Fund
October 31, 1999
In Conclusion
Despite the unusual developments in today's stock market and the
high valuations of growth stocks, we remain optimistic about the
long-term appreciation potential for the Fund's investment universe.
Today, the pace of important scientific advancements is faster than
ever before, and we expect this trend to continue. Although these
positive future developments are already reflected in current share
prices, we continue to believe that there are many attractive
investment opportunities in such industries as semiconductor,
telecommunications, computer software and biotechnology. In the year
ahead, we hope to build on the improved performance experienced
throughout most of the recently concluded fiscal year.
We thank you for your investment in Merrill Lynch Growth Fund, and
we look forward to serving your financial needs throughout the
Fund's new fiscal year and beyond.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Stephen I. Silverman)
Stephen I. Silverman
Senior Vice President and Portfolio Manager
December 14, 1999
To reduce shareholder expenses, Merrill Lynch Growth Fund will no
longer be printing and mailing quarterly reports to shareholders. We
will continue to provide you with reports on a semi-annual and
annual basis.
Merrill Lynch Growth Fund
October 31, 1999
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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 + 5.51% - 0.03%
Five Years Ended 9/30/99 + 9.73 + 8.55
Ten Years Ended 9/30/99 +11.79 +11.19
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/99 + 4.46% + 0.46%
Five Years Ended 9/30/99 + 8.62 + 8.62
Ten Years Ended 9/30/99 +10.65 +10.65
[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 9/30/99 + 4.40% + 3.40%
Inception (10/21/94)
through 9/30/99 + 8.68 + 8.68
[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 9/30/99 + 5.23% - 0.30%
Inception (10/21/94)
through 9/30/99 + 9.54 + 8.35
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Growth Fund
October 31, 1999
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 & Class B Shares and the S&P 500
Total Return Index. Beginning and ending values are:
10/89 10/99
ML Growth Fund++--
Class A Shares $ 9,475 $30,362
ML Growth Fund++--
Class B Shares* $10,000 $28,923
S&P 500 Total Return
Index++++ $10,000 $51,525
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the
Fund's Class C Shares & Class D Shares and the S&P 500
Total Return Index. Beginning and ending values are:
10/21/94** 10/99
ML Growth Fund++--
Class C Shares $10,000 $15,872
ML Growth Fund++--
Class D Shares* $ 9,475 $15,643
S&P 500 Total Return
Index++++ $10,000 $32,307
[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 that Fund management believes has the potential to
achieve above average growth rates and earnings, revenues, cash flow
or enterprise value.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
Merrill Lynch Growth Fund
October 31, 1999
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception
As of October 31, 1999 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Growth Fund Class A Shares* +7.61% + 3.09% +220.44%
ML Growth Fund Class B Shares* +7.39 + 2.06 +189.22
ML Growth Fund Class C Shares* +7.34 + 2.04 + 58.72
ML Growth Fund Class D Shares* +7.55 + 2.82 + 65.12
Standard & Poor's 500 Index** +2.90 +25.67 +415.25/+223.08
<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/inception periods are ten years for Class A & Class B
Shares and from 10/21/94 for Class C & Class D Shares.
**An unmanaged broad-based index comprised of common stocks. Ten
years/since inception total returns are for ten years and from
10/21/94, respectively.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industries Held Long-Term Investments (Note 1a) Net Assets
<S> <C> <S> <C> <C>
Banking & Financial 445,600 Federal Home Loan Mortgage Association $ 24,090,250 0.8%
Services 3,407,670 Lloyds TSB Group PLC 47,073,771 1.7
2,385,000 Safra Republic Holdings, SA 149,062,500 5.2
-------------- ------
220,226,521 7.7
Broadcasting & 700,000 ++Clear Channel Communications, Inc. 56,262,500 2.0
Publishing
Capital Goods-- 800,000 ++Maxim Integrated Products, Inc. 63,100,000 2.2
Technology
Communications 957,654 ++Cisco Systems, Inc. 70,866,396 2.5
Equipment 1,570,400 Lucent Technologies Inc. 100,898,200 3.5
338,292 Nokia Oyj 38,672,116 1.3
-------------- ------
210,436,712 7.3
Computer Services 300,000 ++America Online, Inc. 38,906,250 1.3
Computer Software 1,590,000 ++Intuit, Inc. 46,308,750 1.6
1,400,000 ++Microsoft Corp. 129,587,500 4.5
-------------- ------
175,896,250 6.1
Computers 754,878 ++Dell Computer Corp. 30,242,300 1.1
1,021,400 ++EMC Corp. 74,562,200 2.6
387,200 International Business Machines Corp. 38,090,800 1.3
-------------- ------
142,895,300 5.0
Diversified 1,115,700 General Electric Co. 151,247,081 5.3
Manufacturing 1,981,600 Tyco International Ltd. 79,140,150 2.7
-------------- ------
230,387,231 8.0
Gas Pipeline & 3,848,434 ++TransMontaigne Inc. (b) 44,738,045 1.6
Transmission
Household Products 359,200 The Procter & Gamble Co. 37,671,100 1.3
Insurance 462,000 American International Group, Inc. 47,557,125 1.7
151,112 Axa 21,289,484 0.7
-------------- ------
68,846,609 2.4
Life Sciences 547,000 ++Affymetrix, Inc. 48,136,000 1.7
1,825,000 ++Chiron Corp. 52,012,500 1.8
434,500 CytoTherapeutics, Inc. (Warrants)(a) 4 0.0
343,000 ++Human Genome Sciences, Inc. 29,969,625 1.0
836,000 ++Millennium Pharmaceuticals, Inc. 58,676,750 2.0
1,762,700 Monsanto Co. 67,863,950 2.4
-------------- ------
256,658,829 8.9
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industries Held Long-Term Investments (Note 1a) Net Assets
<S> <C> <S> <C> <C>
Machinery & 204,475 Mannesmann AG $ 32,115,805 1.1%
Equipment
Medical Technology 2,153,000 ++Guidant Corp. 106,304,375 3.7
1,179,600 Medtronic, Inc. 40,843,650 1.4
-------------- ------
147,148,025 5.1
Natural Gas 1,568,000 Enron Corp. 62,622,000 2.2
Pharmaceuticals 582,400 Bristol-Myers Squibb Co. 44,735,600 1.5
485,800 Johnson & Johnson 50,887,550 1.8
700,000 Merck & Co., Inc. 55,693,750 1.9
1,134,600 Pfizer Inc. 44,816,700 1.6
200,200 Schering-Plough Corp. 9,909,900 0.3
2,372,909 SmithKline Beecham PLC 30,539,681 1.1
1,281,800 Warner-Lambert Co. 102,303,662 3.6
-------------- ------
338,886,843 11.8
Retail 736,500 Lowe's Companies, Inc. 40,507,500 1.4
1,613,400 Wal-Mart Stores, Inc. 91,459,613 3.2
-------------- ------
131,967,113 4.6
Semiconductors 831,080 Intel Corp. 64,304,815 2.2
225,500 Motorola, Inc. 21,972,156 0.8
-------------- ------
979,000 Texas Instruments Inc. 87,865,250 3.1
174,142,221 6.1
Telecommunications 1,744,800 ++Global TeleSystems Group, Inc. 41,766,150 1.5
1,257,436 ++MCI WorldCom Inc. 107,825,137 3.7
840,000 ++RCN Corp. 40,162,500 1.4
1,562,873 SBC Communications Inc. 79,608,833 2.8
2,142,000 ++Telefonica SA 35,196,025 1.2
-------------- ------
304,558,645 10.6
Total Long-Term Investments
(Cost--$2,220,343,782) 2,737,465,999 95.3
Face
Amount Short-Term Investments
Repurchase $114,110,000 General Motors Acceptance Corp., purchased
Agreements* on 10/29/1999 to yield 5.38% to 11/01/1999 114,075,894 4.0
Total Short-Term Investments (Cost--$114,075,894) 114,075,894 4.0
Total Investments (Cost--$2,334,419,676) 2,851,541,893 99.3
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Options Nominal Value Value Percent of
Written Covered by Options Issue (Note 1a) Net Assets
<S> <C> <S> <C> <C>
Call Options 300,000 EMC Corp., expiring January 2000 at $72.60 $ (2,301,000) (0.1)%
Written 312,900 Monsanto Company, expiring December 1999 at $50 (71,967) 0.0
521,600 Monsanto Company, expiring December 1999 at $51.1242 (114,752) 0.0
46,850 Monsanto Company, expiring December 1999 at $52.40 (8,433) 0.0
Total Options Written (Premiums Received--$3,471,380) (2,496,152) (0.1)
Total Investments, Net of Options Written (Cost--$2,330,948,296) 2,849,045,741 99.2
Other Assets Less Liabilities 23,736,071 0.8
-------------- ------
Net Assets $2,872,781,812 100.0%
============== ======
<FN>
*Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Non-income producing security.
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(b)Investment in an affiliated company (Note 5).
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$2,334,419,676) (Note 1a) $2,851,541,893
Receivables:
Securities sold $ 89,533,683
Beneficial interest sold 1,779,928
Dividends 912,056 92,225,667
--------------
Prepaid registration fees and other assets (Note 1f) 114,885
--------------
Total assets 2,943,882,445
--------------
Liabilities: Options written, at value (premiums received--$3,471,380)
(Notes 1a &1c) 2,496,152
Payables:
Securities purchased 40,026,800
Beneficial interest redeemed 23,326,332
Investment adviser (Note 2) 1,683,232
Distributor (Note 2) 1,203,582 66,239,946
--------------
Accrued expenses and other liabilities 2,364,535
--------------
Total liabilities 71,100,633
--------------
Net Assets: Net assets $2,872,781,812
==============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 3,340,129
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 5,882,752
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 507,245
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 3,225,071
Paid-in capital in excess of par 2,629,097,057
Accumulated realized capital losses on investments and
foreign currency transactions--net (287,367,807)
Unrealized appreciation on investments and foreign currency
transactions--net 518,097,365
--------------
Net assets $2,872,781,812
==============
Net Asset Value: Class A--Based on net assets of $774,286,979 and 33,401,285 shares
of beneficial interest outstanding $ 23.18
==============
Class B--Based on net assets of $1,247,546,516 and 58,827,524 shares
of beneficial interest outstanding $ 21.21
==============
Class C--Based on net assets of $106,796,833 and 5,072,450 shares
of beneficial interest outstanding $ 21.05
==============
Class D--Based on net assets of $744,151,484 and 32,250,706 shares
of beneficial interest outstanding $ 23.07
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended October 31, 1999
<S> <S> <C> <C>
Investment Dividends (net of $300,285 foreign withholding tax) $ 18,207,266
Income Interest and discount earned 15,198,087
(Notes 1d & 1e): --------------
Total income 33,405,353
--------------
Expenses: Investment advisory fees (Note 2) $ 22,175,519
Account maintenance and distribution fees--Class B (Note 2) 16,198,647
Transfer agent fees--Class B (Note 2) 5,433,474
Transfer agent fees--Class A (Note 2) 2,604,487
Transfer agent fees--Class D (Note 2) 2,440,529
Account maintenance fees--Class D (Note 2) 1,998,861
Account maintenance and distribution fees--Class C (Note 2) 1,404,087
Transfer agent fees--Class C (Note 2) 505,238
Printing and shareholder reports 389,019
Accounting services (Note 2) 342,943
Custodian fees 222,933
Professional fees 142,172
Registration fees (Note 1f) 96,525
Trustees' fees and expenses 45,626
Pricing fees 14,468
Other 68,909
--------------
Total expenses before reimbursement 54,083,437
Reimbursement of expenses (Note 2) (1,082,522)
--------------
Total expenses after reimbursement 53,000,915
--------------
Investment loss--net (19,595,562)
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net (223,758,296)
(Loss) on Foreign currency transactions--net 141,737 (223,616,559)
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 139,817,024
(Notes 1b, 1c, Foreign currency transactions--net (89) 139,816,935
1e & 3): -------------- --------------
Net realized and unrealized loss on investments and foreign
currency transactions (83,799,624)
--------------
Net Decrease in Net Assets Resulting from Operations $ (103,395,186)
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ (19,595,562) $ 75,548,146
Realized loss on investments and foreign
currency transactions--net (223,616,559) (63,976,192)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 139,816,935 (2,191,116,024)
-------------- --------------
Net decrease in net assets resulting from operations (103,395,186) (2,179,544,070)
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A -- (26,531,245)
Shareholders Class B -- (29,259,026)
(Note 1g): Class C -- (2,908,954)
Class D -- (21,460,174)
In excess of investment income--net:
Class A (9,908,351) --
Class B (10,381,062) --
Class C (879,414) --
Class D (8,144,104) --
Realized gain on investments--net:
Class A -- (92,635,994)
Class B -- (264,389,838)
Class C -- (24,792,797)
Class D -- (88,098,272)
In excess of realized capital gain on investments--net:
Class A -- (12,611,827)
Class B -- (35,995,066)
Class C -- (3,375,388)
Class D -- (11,994,043)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (29,312,931) (614,052,624)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (1,972,727,295) (755,047,073)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (2,105,435,412) (3,548,643,767)
Beginning of year 4,978,217,224 8,526,860,991
-------------- --------------
End of year* $2,872,781,812 $4,978,217,224
============== ==============
<FN>
*Undistributed investment income--net (Note 1h) -- $ 17,387,631
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of year $ 22.71 $ 33.13 $ 26.87 $ 23.13 $ 19.19
Performance: ---------- ---------- ---------- ---------- ----------
Investment income (loss)--net (.01) .46 .53 .31 .23
Realized and unrealized gain
(loss) on investments and foreign
currency transactions--net .69 (8.47) 7.98 5.63 4.01
---------- ---------- ---------- ---------- ----------
Total from investment operations .68 (8.01) 8.51 5.94 4.24
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- (.48) (.44) (.35) --
In excess of investment
income--net (.21) -- -- -- --
Realized gain on investments--net -- (1.70) (1.81) (1.85) (.30)
In excess of realized gain on
investments--net -- (.23) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.21) (2.41) (2.25) (2.20) (.30)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 23.18 $ 22.71 $ 33.13 $ 26.87 $ 23.13
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 3.09% (25.83%) 34.03% 28.15% 22.60%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, net of reimbursement .96% .81% .77% .80% .82%
Average ========== ========== ========== ========== ==========
Net Assets: Expenses .99% .85% .81% .84% .84%
========== ========== ========== ========== ==========
Investment income (loss)--net (.03%) 1.72% 1.84% 1.28% 1.10%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 774,287 $1,111,166 $1,769,296 $1,056,870 $ 670,164
========== ========== ========== ========== ==========
Portfolio turnover 101.71% 24.41% 24.75% 30.01% 37.42%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of year $ 20.88 $ 30.63 $ 25.03 $ 21.60 $ 18.12
Performance: ---------- ---------- ---------- ---------- ----------
Investment income (loss)--net (.19) .17 .22 .06 .01
Realized and unrealized gain
(loss) on investments and foreign
currency transactions--net .61 (7.80) 7.39 5.26 3.77
---------- ---------- ---------- ---------- ----------
Total from investment operations .42 (7.63) 7.61 5.32 3.78
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- (.19) (.20) (.04) --
In excess of investment
income--net (.09) -- -- -- --
Realized gain on investments--net -- (1.70) (1.81) (1.85) (.30)
In excess of realized gain on
investments--net -- (.23) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.09) (2.12) (2.01) (1.89) (.30)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 21.21 $ 20.88 $ 30.63 $ 25.03 $ 21.60
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.06% (26.57%) 32.62% 26.84% 21.37%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, net of reimbursement 1.99% 1.83% 1.79% 1.82% 1.84%
Average ========== ========== ========== ========== ==========
Net Assets: Expenses 2.02% 1.87% 1.83% 1.85% 1.87%
========== ========== ========== ========== ==========
Investment income (loss)--net (.98%) .70% .82% .26% .04%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $1,247,547 $2,544,979 $4,687,523 $2,916,507 $1,920,451
========== ========== ========== ========== ==========
Portfolio turnover 101.71% 24.41% 24.75% 30.01% 37.42%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
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 C++
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of year $ 20.72 $ 30.43 $ 24.89 $ 21.59 $ 18.12
Performance: ---------- ---------- ---------- ---------- ----------
Investment income(loss)--net (.18) .17 .22 .06 .03
Realized and unrealized gain
(loss) on investments and foreign
currency transactions--net .59 (7.75) 7.34 5.23 3.74
---------- ---------- ---------- ---------- ----------
Total from investment operations .41 (7.58) 7.56 5.29 3.77
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- (.20) (.21) (.14) --
In excess of investment
income--net (.08) -- -- -- --
Realized gain on investments--net -- (1.70) (1.81) (1.85) (.30)
In excess of realized gain on
investments--net -- (.23) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.08) (2.13) (2.02) (1.99) (.30)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 21.05 $ 20.72 $ 30.43 $ 24.89 $ 21.59
========== ========== ========== ========== ==========
Total Investment Based on net asset value
Return:* per share 2.04% (26.60%) 32.63% 26.84% 21.32%
========== ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 2.02% 1.84% 1.80% 1.84% 1.86%
Net Assets: ========== ========== ========== ========== ==========
Expenses 2.05% 1.88% 1.84% 1.87% 1.89%
========== ========== ========== ========== ==========
Investment income (loss)--net (.96%) .68% .81% .25% .14%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 106,797 $ 239,445 $ 427,377 $ 187,221 $ 85,486
========== ========== ========== ========== ==========
Portfolio turnover 101.71% 24.41% 24.75% 30.01% 37.42%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class D++
For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of year $ 22.63 $ 33.01 $ 26.79 $ 23.06 $ 19.18
Performance: ---------- ---------- ---------- ---------- ----------
Investment income(loss)--net (.06) .39 .46 .24 .22
Realized and unrealized gain
(loss) on investments and foreign
currency transactions--net .68 (8.43) 7.95 5.63 3.96
---------- ---------- ---------- ---------- ----------
Total from investment operations .62 (8.04) 8.41 5.87 4.18
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net -- (.41) (.38) (.29) --
In excess of investment
income--net (.18) -- -- -- --
Realized gain on investments--net -- (1.70) (1.81) (1.85) (.30)
In excess of realized gain on
investments--net -- (.23) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.18) (2.34) (2.19) (2.14) (.30)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 23.07 $ 22.63 $ 33.01 $ 26.79 $ 23.06
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.82% (26.00%) 33.67% 27.83% 22.29%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.21% 1.06% 1.02% 1.05% 1.08%
Net Assets: ========== ========== ========== ========== ==========
Expenses 1.24% 1.10% 1.06% 1.08% 1.10%
========== ========== ========== ========== ==========
Investment income (loss)--net (.26%) 1.47% 1.59% 1.03% 1.00%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 744,151 $1,082,627 $1,642,665 $ 932,811 $ 614,357
========== ========== ========== ========== ==========
Portfolio turnover 101.71% 24.41% 24.75% 30.01% 37.42%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 1999
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's financial statements are
prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and
estimates. The Fund offers four classes of shares under the Merrill
Lynch Select Pricing SM System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C
may be subject to a contingent deferred sales charge. All classes of
shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Portfolio securities that 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 that 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 or
purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the over-the-
counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). 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.
* 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.
* 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, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
Written and purchased options are non-income producing investments.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk of existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction if 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.
(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. Distributions in
excess of investment income--net are due primarily to differing tax
treatments for post-October losses.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences have been
reclassified as follows: $225,057 between undistributed net
investment income and accumulated net realized capital losses; $19
between paid-in capital in excess of par and accumulated net
realized capital losses; and $31,745,919 between paid-in capital in
excess of par and undistributed net investment income. These
reclassifications have no effect on 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 ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is 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
.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: .65% of the average daily net assets on the first $1 billion;
.625% of the average net assets on the next $500 million; and .60%
of the average net assets over $1.5 billion but not exceeding $10
billion and .575% of average net assets in excess of $10 billion.
For the year ended October 31, 1999, MLAM earned fees of
$22,175,519, of which $1,082,522 was voluntarily waived.
Merrill Lynch Growth Fund
October 31, 1999
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:
Account Distribution
Maintenance Fee Fee
Class B .25% .75%
Class C .25% .75%
Class D .25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("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, 1999, 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 $ 1,885 $ 10,224
Class D $25,575 $150,072
For the year ended October 31, 1999, MLPF&S received contingent
deferred sales charges of $5,430,219 and $110,221 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$70,742 and $8,476 relating to transactions subject to front-end
sales charge waivers in Class A and Class D Shares, respectively.
In addition, MLPF&S received $1,178,615 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended October 31, 1999.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for year ended October 31, 1999 were $3,163,009,866 and
$4,455,266,713, respectively.
Net realized gains (losses) for the year ended October 31, 1999 and
net unrealized gains (losses) as of October 31, 1999 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $(223,756,107) $ 517,122,217
Short-term investments (2,189) --
Options written -- 975,228
Foreign currency
transactions 141,737 (80)
------------- -------------
Total $(223,616,559) $ 518,097,365
============= =============
Transactions in options written for the year ended October 31, 1999,
were as follows:
Nominal Value
Covered by Premiums
Call Options Written Written Options Received
Outstanding call options
written, beginning of
period -- --
Options written 1,181,350 $ 3,471,380
------------ -------------
Outstanding call options
written, end of period 1,181,350 $ 3,471,380
------------ -------------
As of October 31, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $517,723,658, of which $581,600,368
related to appreciated securities and $63,876,710 related to
depreciated securities. At October 31, 1999, the aggregate cost of
investments, net of premiums received for options written, for
Federal income tax purposes was $2,331,322,083.
Merrill Lynch Growth Fund
October 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest
transactions was $1,972,727,295 and $755,047,073 for the years ended
October 31, 1999 and October 31, 1998, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 11,565,531 $ 240,814,815
Shares issued to share-
holders in reinvestment of
dividends 459,562 9,577,280
------------- --------------
Total issued 12,025,093 250,392,095
Shares redeemed (27,558,400) (572,349,890)
------------- --------------
Net decrease (15,533,307) $ (321,957,795)
============= ==============
Class A Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 22,278,893 $ 605,535,677
Shares issued to share-
holders in reinvestment of
dividends and distributions 3,995,517 118,469,939
------------- --------------
Total issued 26,274,410 724,005,616
Shares redeemed (30,752,326) (794,372,160)
------------- --------------
Net decrease (4,477,916) $ (70,366,544)
============= ==============
Class B Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 15,919,015 $ 305,351,815
Shares issued to share-
holders in reinvestment of
dividends 480,513 9,245,064
------------- --------------
Total issued 16,399,528 314,596,879
Automatic conversion of
shares (6,389,720) (122,861,457)
Shares redeemed (73,087,724) (1,396,489,700)
------------- --------------
Net decrease (63,077,916) $(1,204,754,278)
============= ===============
Class B Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 39,588,205 $ 996,388,789
Shares issued to share-
holders in reinvestment of
dividends and distributions 10,881,118 300,907,393
------------- --------------
Total issued 50,469,323 1,297,296,182
Automatic conversion of
shares (7,275,492) (175,563,924)
Shares redeemed (74,319,312) (1,755,281,872)
------------- --------------
Net decrease (31,125,481) $ (633,549,614)
============= ==============
Class C Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 844,502 $ 16,133,830
Shares issued to shareholders
in reinvestment of dividends 39,676 757,812
------------- -------------
Total issued 884,178 16,891,642
Shares redeemed (7,365,382) (139,843,279)
------------- --------------
Net decrease (6,481,204) $(122,951,637)
============= =============
Class C Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 5,773,646 $ 148,910,650
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,035,142 28,415,638
------------- --------------
Total issued 6,808,788 177,326,288
Shares redeemed (9,297,825) (220,244,333)
------------- --------------
Net decrease (2,489,037) $ (42,918,045)
============= ==============
Class D Shares for the Year Dollar
Ended October 31, 1999 Shares Amount
Shares sold 5,370,336 $ 111,940,566
Shares issued to shareholders
in reinvestment of dividends 348,930 7,254,254
Automatic conversion of
shares 5,892,240 122,861,457
------------- --------------
Total issued 11,611,506 242,056,277
Shares redeemed (27,209,168) (565,119,862)
------------- --------------
Net decrease (15,597,662) $ (323,063,585)
============= ==============
Class D Shares for the Year Dollar
Ended October 31, 1998 Shares Amount
Shares sold 15,622,997 $ 429,388,296
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,664,390 108,678,158
Automatic conversion of
shares 6,721,770 175,563,924
------------- --------------
Total issued 26,009,157 713,630,378
Shares redeemed (27,919,811) (721,843,248)
------------- --------------
Net decrease (1,910,654) $ (8,212,870)
============= ==============
Merrill Lynch Growth Fund
October 31, 1999
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:
<TABLE>
Decrease in Decrease in Dividend
Industry Affiliate Shares--Net Cost--Net Income
<S> <S> <C> <C> <C>
Gas Pipeline & Transmission TransMontaigne Inc. (7,000) $ (38,500) ++
<FN>
++Non-income producing security.
</TABLE>
6. Capital Loss Carryforward:
At October 31, 1999, the Fund had a net capital loss carryforward of
approximately $286,994,000, of which $63,610,000 expires in 2006 and
$223,384,000 expires in 2007. This amount will be available to
offset like amounts of any future taxable gains.
Merrill Lynch Growth Fund
October 31, 1999
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
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, 1999, 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, 1999 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
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, 1999, 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 16, 1999
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
Of the ordinary income distribution paid by Merrill Lynch Growth
Fund to shareholders of record on December 10, 1998, 29.85%
qualifies for the dividends received deduction for corporations.
Additionally, 41.93% of the ordinary income distribution represents
a distribution in excess of accumulated earnings. Finally, there
were no long-term capital gains distributions paid by the Fund
during the fiscal year ended October 31, 1999.
Please retain this information for your records.
Merrill Lynch Growth Fund
October 31, 1999
PORTFOLIO INFORMATION (unaudited)
As of October 31, 1999
Percent of
Ten Largest Equity Holdings Net Assets
General Electric Co. 5.3%
Safra Republic Holdings, SA 5.2
Microsoft Corp. 4.5
MCI WorldCom Inc. 3.7
Guidant Corp. 3.7
Warner-Lambert Co. 3.6
Lucent Technologies Inc. 3.5
Wal-Mart Stores, Inc. 3.2
Texas Instruments Inc. 3.1
SBC Communications Inc. 2.8
Percent of
Geographic Allocation Net Assets
United States 88.2%
United Kingdom 2.8
Finland 1.3
Spain 1.2
Germany 1.1
France 0.7
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, Trustee
Robert R. Martin, Trustee
Joseph L. May, Trustee
Andre F. Perold, Trustee
Arthur Zeikel, Trustee
Robert C. Doll, Senior Vice President
Stephen I. Silverman, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Lori A. Martin, Secretary
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
