MERRILL LYNCH
GROWTH FUND
FUND LOGO
Quarterly Report
July 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 July 31, 1999, Merrill Lynch Growth Fund's
Class A, Class B, Class C and Class D Shares had total returns of
+10.86%, +10.52%, +10.54% and +10.74%, respectively. The Fund
outperformed both the unmanaged Standard & Poor's 500 (S&P 500)
Index and unmanaged S&P 500/Barra Growth Index, which returned
- -0.16% and +0.52%, respectively, for the same three-month period.
(Fund results do not reflect sales charges, and would be lower if
sales charges were included. Complete performance information can be
found on pages 3 and 4 of this report to shareholders.)
Portfolio Matters
The Fund's outperformance was largely attributable to Safra Republic
Holdings, Tyco International Ltd. and our biotechnology stocks.
Safra Republic Holdings is a Luxembourg holding company for the
European branches of Republic National Bank of New York. In May,
HSBC Holdings plc, a London-based bank holding company, offered to
acquire Safra at a 48% premium to the then-current trading price.
Another significant contributor to the Fund's July quarter
performance was Tyco International Ltd., a company we discussed in
our last report to shareholders. Tyco stock was buoyed by growing
investor appreciation of the accretive nature of the company's
recently consummated acquisitions as well as by the announcement of
fiscal third-quarter results that were more than 6% higher than
consensus expectations.
The biotechnology sector was one of the best US equity market
sectors in the July quarter. The sector benefited from increased
investor interest generated by successful new product launches,
acquisition activity and investment flows out of the underperforming
large pharmaceutical stocks. As a group, the Fund's biotechnology
positions outpaced both the unmanaged S&P Midcap Biotechnology Index
and the unmanaged AMEX Biotechnology Index for the three months
ended July 31, 1999.
During the July quarter, we initiated a position in Clear Channel
Communications, Inc. Clear Channel is a diversified media company
with operations in radio and television broadcasting and outdoor
advertising. The company has been a key consolidator of the out-of-
home media industry and is a major beneficiary of the secular shift
of advertising away from newspapers and network television towards
radio and outdoor media. The company's management team, led by the
Mays family, has an excellent record with respect to anticipation of
industry trends and the allocation of capital. We believe that the
company will continue to make astute investments in the broadcasting
industry. Clear Channel is forecast to grow free cash flow at rates
in excess of 20% per annum over the next few years.
The Environment
The US equity market exhibited significant volatility during the
July quarter. Following a sharp decline in the latter half of May,
the popular indexes rose to new highs in mid-July before retreating
once again. The roller coaster movement of the equity markets was
induced by the ebb and flow of concerns over the continued strength
of the US economy, signs of recovery in the European and Asian
economies, and the attendant fear of a re-emergence of inflation.
Technology was the best-performing sector in the quarter, led by the
semiconductor and semiconductor equipment industries. Second best
was the communication services sector, paced by the wireless
communications group. The transportation sector turned in the
quarter's worst performance with all component industries posting
negative returns.
We expect the debate over inflation and the direction of interest
rates to persist through the rest of the year. However, we do not
foresee significant changes to our investment strategy. The Fund
will continue to emphasize the stocks of companies that we believe
are capable of superior growth in any economic environment. Since
our investment philosophy is based on bottom-up stock selection, we
do not anticipate making any major portfolio investments based on
macroeconomic views, nor do we expect to time the market through
adjustment of our cash position. Rather we expect to be fully
invested under all market conditions and seek to outperform the
relevant benchmarks over time through the assumption of stock-
specific risk.
Merrill Lynch Growth Fund
July 31, 1999
In Conclusion
We expect the implementation of the Fund's new investment strategy
to be substantially complete by the end of the Fund's fiscal year.
At that time, we expect that the top 20 holdings should comprise
about 60%-65% of the Fund's assets with another 20 stocks making up
the balance. We will continue to emphasize companies that, in our
view, will have growth in earnings, revenues, or cash flows far in
excess of that of the average firm.
We thank you for your investment in Merrill Lynch Growth Fund, and
we look forward to reviewing our outlook and strategy with you in
the next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Stephen I. Silverman)
Stephen I. Silverman
Senior Vice President and Portfolio Manager
September 8, 1999
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
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
Merrill Lynch Growth Fund
July 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 6/30/99 -17.93% -22.42%
Five Years Ended 6/30/99 + 9.75 + 8.58
Ten Years Ended 6/30/99 +12.14 +11.54
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 -18.76% -21.98%
Five Years Ended 6/30/99 + 8.65 + 8.65
Ten Years Ended 6/30/99 +11.00 +11.00
[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 6/30/99 -18.80% -19.60%
Inception (10/21/94)
through 6/30/99 + 8.38 + 8.38
[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 6/30/99 -18.13% -22.43%
Inception (10/21/94)
through 6/30/99 + 9.23 + 7.98
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Growth Fund
July 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* - 7.62% +10.86% +201.62%
ML Growth Fund Class B Shares* - 8.56 +10.52 +172.14
ML Growth Fund Class C Shares* - 8.60 +10.54 + 47.86
ML Growth Fund Class D Shares* - 7.86 +10.74 + 53.52
Standard & Poor's 500 Index** +20.20 - 0.16 +396.63/+213.97
<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 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.
PORTFOLIO INFORMATION
As of July 31, 1999
Percent of
Ten Largest Equity Holdings Net Assets
Safra Republic Holdings 6.4%
Tyco International Ltd. 5.9
Guidant Corp. 4.3
Microsoft Corp. 4.2
General Electric Co. 4.1
MCI WorldCom Inc. 3.5
Chiron Corp. 3.3
Warner-Lambert Co. 2.9
Maxim Integrated Products, Inc. 2.6
Texas Instruments Inc. 2.5
Percent of
Geographic Allocation Net Assets
United States 92.4%
United Kingdom 3.9
Spain 1.2
Germany 1.1
Finland 1.0
France 0.6
Equity Portfolio Changes for the
Quarter Ended July 31, 1999
Additions
America Online, Inc.
*Chemdex Corp.
Clear Channel Communications,
Inc.
*drugstore.com, Inc.
*Freeserve PLC
*Genentech, Inc.
*Glaxo Wellcome PLC
*The Goldman Sachs Group, Inc.
Intuit, Inc.
*Nextel Communications, Inc.
(Class A)
Deletions
AstraZeneca Group PLC
*Chemdex Corp.
Compaq Computer Corp.
Convergys Corp.
*drugstore.com, Inc.
Ericsson LM 'B' Shares
*Freeserve PLC
*Genentech, Inc.
General Motors Corp.
(Class H)
The Gillette Co.
*Glaxo Wellcome PLC
*The Goldman Sachs Group,
Inc.
Hewlett-Packard Co.
McKesson HBOC, Inc.
National Instruments Corp.
*Nextel Communications,
Inc. (Class A)
The Walt Disney Co.
<FN>
*Added and deleted
in the same quarter.
Merrill Lynch Growth Fund
July 31, 1999
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industries Held Long-Term Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Banking & Financial 445,600 Federal Home Loan Mortgage Association $ 26,762,888 $ 25,566,300 0.9%
Services 3,407,670 Lloyds TSB Group PLC 45,016,956 44,273,812 1.5
2,735,000 Safra Republic Holdings 51,275,125 187,077,523 6.4
-------------- -------------- ------
123,054,969 256,917,635 8.8
Broadcasting & 700,000 Clear Channel Communications, Inc. 46,603,902 48,693,750 1.6
Publishing
Capital Goods-- 1,185,000 Maxim Integrated Products, Inc. 35,058,356 75,840,000 2.6
Technology
Communications 957,654 Cisco Systems, Inc. 52,758,445 59,494,255 2.0
Equipment 970,400 Lucent Technologies Inc. 53,676,326 63,136,650 2.2
338,292 Nokia OYJ 'A' 23,691,349 29,330,728 1.0
-------------- -------------- ------
130,126,120 151,961,633 5.2
Computer Services 300,000 America Online, Inc. 34,095,990 28,537,500 1.0
Computer Software 530,000 Intuit, Inc. 40,718,556 43,327,500 1.5
1,444,052 Microsoft Corp. 123,545,579 123,827,459 4.2
-------------- -------------- ------
164,264,135 167,154,959 5.7
Computers 754,878 Dell Computer Corp. 37,553,307 30,855,638 1.1
1,021,400 EMC Corp. 54,583,091 61,858,538 2.1
546,200 International Business Machines Corp. 48,879,523 68,650,513 2.3
-------------- -------------- ------
141,015,921 161,364,689 5.5
Diversified 1,115,700 General Electric Co. 114,475,742 121,611,300 4.1
Manufacturing 1,770,000 Tyco International Ltd. 136,898,380 172,906,875 5.9
-------------- -------------- ------
251,374,122 294,518,175 10.0
Gas Pipeline & 3,855,434 TransMontaigne Inc. 27,060,669 40,963,986 1.4
Transmission
Household Products 359,200 The Procter & Gamble Co. 32,096,140 32,507,600 1.1
Insurance 151,112 AXA 21,544,994 17,711,656 0.6
369,600 American International Group, Inc. 36,985,640 42,919,800 1.5
-------------- -------------- ------
58,530,634 60,631,456 2.1
Life Sciences 1,000,000 Affymetrix, Inc. 18,526,477 72,375,000 2.5
3,875,000 Chiron Corp. 65,166,113 96,875,000 3.3
434,500 CytoTherapeutics, Inc. (Warrants)(a) 651,750 0.0
1,175,000 Human Genome Sciences, Inc. 42,898,758 60,953,129 2.1
1,000,000 Millennium Pharmaceuticals, Inc. 17,754,752 62,250,000 2.1
1,762,700 Monsanto Co. 79,435,292 68,965,637 2.4
-------------- -------------- ------
224,433,142 361,418,766 12.4
</TABLE>
Merrill Lynch Growth Fund
July 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Long-Term Investments Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Machinery & 204,475 Mannesmann AG $ 28,957,874 $ 31,101,433 1.1%
Equipment
Medical Technology 2,153,000 Guidant Corp. 110,944,203 126,085,063 4.3
589,800 Medtronic, Inc. 44,434,566 42,502,463 1.4
-------------- -------------- ------
155,378,769 168,587,526 5.7
Natural Gas 784,000 Enron Corp. 51,658,188 66,787,000 2.3
Pharmaceuticals 582,400 Bristol-Myers Squibb Co. 37,167,553 38,729,600 1.3
390,300 Eli Lilly and Co. 35,666,685 25,613,438 0.9
485,800 Johnson & Johnson 40,792,498 44,754,325 1.5
700,000 Merck & Co., Inc. 51,264,991 47,381,250 1.6
1,134,600 Pfizer, Inc. 53,943,824 38,505,487 1.3
200,200 Schering-Plough Corp. 10,857,375 9,809,800 0.3
2,372,908 SmithKline Beecham PLC 32,655,540 29,215,241 1.0
1,281,800 Warner-Lambert Co. 92,338,708 84,598,800 2.9
-------------- -------------- ------
354,687,174 318,607,941 10.8
Retail 542,900 The Home Depot, Inc. 32,168,622 34,643,806 1.2
1,613,400 Wal-Mart Stores, Inc. 68,353,938 68,166,150 2.3
-------------- -------------- ------
100,522,560 102,809,956 3.5
Semiconductors 831,080 Intel Corp. 57,058,859 57,344,520 2.0
225,500 Motorola, Inc. 16,000,514 20,576,875 0.7
513,800 Texas Instruments Inc. 48,027,281 73,987,200 2.5
-------------- -------------- ------
121,086,654 151,908,595 5.2
Telecommunications 745,800 Ameritech Corp. 46,872,521 54,629,850 1.9
1,744,800 Global TeleSystems Group, Inc. 61,543,887 55,615,500 1.9
1,257,436 MCI WorldCom Inc. 100,265,310 103,738,470 3.5
581,400 SBC Communications, Inc. 31,034,048 33,248,812 1.2
513,400 Sprint Corp. (FON Group) 21,057,956 26,536,362 0.9
2,142,000 Telefonica SA 32,110,916 34,346,096 1.2
1,970,000 Vodafone Airtouch PLC 36,581,161 41,998,824 1.4
-------------- -------------- ------
329,465,799 350,113,914 12.0
Total Long-Term Investments 2,409,471,118 2,870,426,514 98.0
Face
Amount Short-Term Investments
Commercial Paper* $65,787,000 General Electric Capital Corp., 5.13%
due 8/02/1999 65,768,251 65,768,251 2.2
Total Short-Term Investments 65,768,251 65,768,251 2.2
</TABLE>
Merrill Lynch Growth Fund
July 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Options Nominal Value Covered Premiums Percent of
Written by Options Written Issue Received Value Net Assets
<S> <C> <S> <C> <C> <C>
Call Options 300,000 EMC Corp., expiring January 2000
Written at $72.60 $ (1,459,260) $ (1,422,000) (0.1)%
312,900 Monsanto Co., expiring December 1999
at $50 (766,605) (475,608) 0.0
521,600 Monsanto Co., expiring December 1999
at $51.1242 (1,134,949) (740,672) 0.0
46,850 Monsanto Co., expiring December 1999
at $52.40 (110,566) (58,094) 0.0
Total Options Written (3,471,380) (2,696,374) (0.1)
Total Investments, Net of Options Written $2,471,767,989 2,933,498,391 100.1
==============
Liabilities in Excess of Other Assets (3,334,633) (0.1)
-------------- ------
Net Assets $2,930,163,758 100.0%
============== ======
Net Asset Class A--Based on net assets of $776,265,079 and 36,046,373
Value: shares outstanding $ 21.54
==============
Class B--Based on net assets of $1,303,738,215 and 66,007,441
shares outstanding $ 19.75
==============
Class C--Based on net assets of $110,368,207 and 5,628,008
shares outstanding $ 19.61
==============
Class D--Based on net assets of $739,792,257 and 34,491,160
shares outstanding $ 21.45
==============
<FN>
*Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
(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.
</TABLE>
