MERRILL LYNCH
GROWTH FUND
FUND LOGO
Annual Report
October 31, 2000
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
Fiscal Year in Review
Merrill Lynch Growth Fund outperformed the unmanaged Standard &
Poor's (S&P)/Barra Growth Index for the one-year period ended
October 31, 2000. The Fund's Class A, Class B, Class C and Class D
Shares had total returns of +13.24%, +12.07%, +12.11% and +13.00%,
respectively, compared with an Index return of +2.07%. In addition,
the Fund also outperformed the Index for the six-month period ended
October 31, as the Fund's Class A and Class B Shares had total
returns of -6.32% and -6.78%, respectively, compared with an Index
return of -7.90%. (Fund performance shown does 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.)
Almost all of the Fund's outperformance for the fiscal year occurred
during January and February, reflecting the strong appreciation of
several of our biotechnology investments. Aside from these two
months of exceptional performance, the Fund's results were
relatively lackluster over the balance of the year. Only a few other
positions had any meaningful positive impact on our performance over
the course of the fiscal year: EMC Corporation, Enron Corp., Maxim
Integrated Products, Inc. and Corning Incorporated.
Analyzing Investment Performance
When we compare the Fund's investment results with those of the
unmanaged S&P/Barra Growth Index, we evaluate our performance in
terms of "successes of commission" (as described below in #1);
"successes of omission" (see #2); "errors of commission" (see #3)
and "errors of omission" (see #4 & #5):
1. If a stock we own performs well--whether it is or is not included
in the S&P/Barra Growth Index--it is a positive for the Fund's
performance. The outperformance will be enhanced if we overweight
the stock relative to the Index. Our investment decisions in this
area made a significantly positive contribution to the Fund's
performance relative to the Index during the fiscal year; for
example, our overweighting of Corning, an Index stock, and the
purchase of Enron, which is not an Index stock.
2. If a stock that we do not own performs poorly--and it is included
in the S&P/Barra Growth Index--then it is a positive for the Fund's
relative performance. The outperformance will be lessened if we
merely underweight the stock relative to the Index instead of not
owning it at all. Our investment decisions in this area made a
significantly positive contribution to the Fund's performance
relative to the Index during the fiscal year. An example of such a
"success of omission" was our avoidance of Index stock Yahoo!, Inc.,
which fell sharply this year. Underweighting another poor performer,
such as Lucent Technologies, Inc., helped performance relative to
the Index, but with hindsight it would have been better not to own
the stock at all.
3. If a stock that we own performs poorly--whether it is or is not
included in the S&P/Barra Growth Index--it is a negative for the
Fund's relative performance. If the stock is included in the Index,
the underperformance will be magnified if we overweight the stock
relative to the Index and lessened if we underweight the stock
relative to the Index. Our investment decisions in this area
hindered the Fund's performance relative to the Index during the
fiscal year. For example, our experience in buying shares of the
high-growth technology stocks Bookham Technology PLC and Netro
Corporation in the belief that they would outperform the Index was a
mistake, in hindsight.
4. If a stock that we do not own performs well--and it is included
in the S&P/Barra Growth Index--then it is a negative for the Fund's
relative performance. This underperformance will be lessened if we
simply underweight the stock relative to the Index. Our investment
decisions in this area had a lesser impact on the Fund's performance
relative to the Index for the fiscal year, although we would have
been better off if we had purchased shares of the strong performers
Oracle Corporation and Sun Microsystems, Inc., both of which are in
the Index and outperformed it. In addition, although we owned shares
of General Electric Company, our position is a significant
underweight relative to its exposure in the Index.
Merrill Lynch Growth Fund
October 31, 2000
5. If a stock that we do not own performs well--even if it is not
included in the S&P/Barra Growth Index--it is a missed opportunity.
Our investment decisions in this area had a negative impact on the
Fund's absolute performance. For example, we missed opportunities to
benefit from the extremely strong performances of Juniper Networks,
Inc., Siebel Systems, Inc., BEA Systems, Inc. and CIENA Corp. The
challenge in evaluating these companies is that their shares trade
at well over 100 times prospective earnings. However, they are also
growing at rates that are much faster than typical growth companies.
We discuss our experience in areas #3 and #5 in the "Emerging High
Tech Growth Companies" section of this letter to shareholders.
Our Investment Universe
Whether our investments are the same as or different from those
stocks included in the Index, it is important to remember that our
equity investments are growth stocks. A growth stock, as we define
it, is one that is increasing in economic value at a rate that is
appreciably faster than the average company. Ideally, our stock
investments also tend to be toward the larger capitalization issues;
that is, those that have market capitalizations of more than $10
billion.
Since our investment universe is limited to growth stocks, we do
not invest in stocks because we believe that their prices are simply
too low to reflect the value of their respective companies. We also
do not invest in companies that are likely to have slightly better-
than-average earnings growth for several years, and subsequently
revert to slower growth rates because of the cyclical nature of
their industries. Furthermore, we do not seek to adapt our
investment style based on the rotation of the stock market from out-
of-favor companies/sectors to in-favor companies/sectors. This is
important to remember because we are comparing the Fund's
performance with that of the unmanaged S&P/Barra Growth Index. We
strive to outperform this Index, no matter what the stock market
conditions and not to outperform the stock market in general, or
some other unmanaged index. In an environment in which value stocks
outperform growth stocks, our performance will probably be inferior
to that of many value-oriented funds. Similarly, in an environment
in which growth outperforms value, our performance should be better
than many value funds. However, even if we outperform all value
funds, we have not done well unless we outperform relative to our
investable universe, which is the S&P/Barra Growth Index.
Emerging High Tech Growth Companies
During the fiscal year, emerging high tech growth companies caused
the worst relative underperformance for the Fund. However, there
were a number of companies (some with very large market
capitalizations) that provided truly extraordinary investment
returns. These companies are growing rapidly in very fast-growing
businesses. For these emerging high tech growth companies, security
analysts' expectations--and the companies' ability to meet/beat them-
-seem to be of paramount importance. We observe that the security
analysts are focusing not on net income, return on equity, or other
typical measures of value or profitability, but on revenue. In
particular, revenue growth (and typically as it is measured from one
quarter to the next) appears to be viewed by the market as the most
important indicator of growth. The investment "stars" in the
emerging high tech area are those companies with very high and
expanding rates of sequential revenue growth.
In many respects, such companies are logical candidates for
investment for us, since we have come to believe that above-average
revenue growth is one of the hallmarks of growth companies. This
type of company has the potential to exhibit sustained growth.
Improving operating margins are not very sustainable. However, these
stocks are also extremely volatile. For example, it is not uncommon
to see these stocks double or triple in a few months, then decline
by over 50%, then double again, only to decline subsequently by as
much as 70%--all in one year. Such erratic stock price movements are
not representative of fundamental changes in the companies' business
prospects, but of the rapidly changing investor sentiment to which
the stock prices are subjected.
Merrill Lynch Growth Fund
October 31, 2000
Our forays into emerging high tech growth companies have not yielded
successful results thus far. However, since we continue to believe
that such companies fit our investment profile, we will seek to
incorporate more investments like them into the portfolio. We
continue to believe that over the long-term, emerging high tech
growth companies will offer the Fund attractive opportunities for
capital appreciation, albeit with much volatility along the way.
Current Investment Strategy
At October 31, 2000, the Fund was positioned with significant
exposure to growth stocks in the financial sector (shares of
Associates First Capital Corporation were purchased as a means to
establish a position in Citigroup Inc. when Associates First was
acquired by Citigroup after the close of the period on November 30,
2000) and in electronic management systems (EMS) companies
(Solectron Corporation and Sanmina Corporation). We also have a
significant exposure to Enron Corp., a group of power technology
companies, two programmable logic device companies (Xilinx, Inc. and
Lattice Semiconductor Corporation), two wireless telecommunications
providers (Vodaphone AirTouch PLC and McLeodUSA Incorporated),
Corning Incorporated, and a number of pharmaceutical investments
that are different from the pharmaceutical stocks in the S&P/Barra
Growth Index. If these investments are successful, then the Fund
will outperform relative to the Index. However, if these investments
are not successful, then the Fund will underperform relative to the
Index.
In Conclusion
We thank you for your investment in Merrill Lynch Growth Fund, and
we look forward to reviewing our outlook and strategy with you again
in our next semi-annual 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
December 13, 2000
Merrill Lynch Growth Fund
October 31, 2000
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. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such a waiver, the Fund's
performance would have been lower.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/00 +26.02% +19.41%
Five Years Ended 9/30/00 + 8.36 + 7.20
Ten Years Ended 9/30/00 +15.93 +15.30
*Maximum sales charge is 5.25%. (Prior to October 21, 1994,
Class A Shares were offered at a higher sales charge. Thus,
actual returns would have been lower than shown for the
ten-year period.)
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/00 +24.75% +20.75%
Five Years Ended 9/30/00 + 7.26 + 7.26
Ten Years Ended 9/30/00 +14.74 +14.74
*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*
One Year Ended 9/30/00 +24.74% +23.74%
Five Years Ended 9/30/00 + 7.24 + 7.24
Inception (10/21/94)
through 9/30/00 +11.22 +11.22
*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*
One Year Ended 9/30/00 +25.73% +19.13%
Five Years Ended 9/30/00 + 8.10 + 6.94
Inception (10/21/94)
through 9/30/00 +12.10 +11.09
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Growth Fund
October 31, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of Class A & Class B Shares*
in comparison to the growth of a $10,000 investment in the
S&P/Barra Growth Index++++ and the S&P 500 Total Return
Index++++++. Beginning and ending values are:
10/90 10/00
ML Growth Fund
Class A Shares* $ 9,475 $40,175
ML Growth Fund
Class B Shares* $10,000 $38,274
S&P/Barra Growth Index++++ $10,000 $64,723
S&P 500 Total Return Index++++++ $10,000 $59,083
A line graph depicting the growth of Class C & Class D Shares*
in comparison to the growth of a $10,000 investment in the
S&P/Barra Growth Index++++ and the S&P 500 Total Return
Index++++++. Beginning and ending values are:
12/21/94 10/00
ML Growth Fund
Class C Shares* $10,000 $17,795
ML Growth Fund
Class D Shares* $ 9,475 $17,676
S&P/Barra Growth Index++++ $10,000 $38,182
S&P 500 Total Return Index++++++ $10,000 $34,275
*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 in earnings, revenues, cash flow
or earnings before interest, taxes, depreciation and amortization.
++++This unmanaged broad-based Index is a subset of the S&P 500
Index containing those companies with higher price-to-book ratios.
++++++This unmanaged broad-based Index is comprised of common
stocks.
Past performance is not predictive of future performance.
Merrill Lynch Growth Fund
October 31, 2000
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Ten-Year/
6-Month 12-Month Since Inception
As of October 31, 2000 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Growth Fund Class A Shares* -6.32% +13.24% +324.04%
ML Growth Fund Class B Shares* -6.78 +12.07 +282.71
ML Growth Fund Class C Shares* -6.76 +12.11 + 77.95
ML Growth Fund Class D Shares* -6.39 +13.00 + 86.59
Standard & Poor's/Barra Growth Index** -7.90 + 2.07 +547.23/+281.82
Standard & Poor's 500 Index*** -1.03 + 6.09 +490.83/+242.76
*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.
**This unmanaged broad-based Index is a subset of the S&P 500 Index,
containing those companies with higher price-to-book ratios.
***An unmanaged broad-based index comprised of common stocks. Ten-
year/since inception total returns are for ten years and from
10/21/94, respectively.
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industries Held Long-Term Investments Value Net Assets
<S> <C> <S> <C> <C>
Beverages 679,000 The Coca-Cola Company $ 40,994,625 1.6%
Broadcasting & 630,000 ++Clear Channel Communications, Inc. 37,839,375 1.5
Publishing
Communication 1,915,308 ++Cisco Systems, Inc. 103,187,218 4.0
Equipment 648,200 ++Comverse Technology, Inc. 72,395,837 2.8
-------------- ------
175,583,055 6.8
Computer Hardware 686,000 ++Dell Computer Corporation 20,194,125 0.8
1,130,800 ++EMC Corporation 100,711,875 3.9
387,200 International Business Machines Corporation 38,139,200 1.5
-------------- ------
159,045,200 6.2
Computer Software 1,300,000 ++Gemstar-TV Guide International, Inc. 89,050,000 3.4
1,480,000 ++Microsoft Corporation 101,935,000 3.9
450,000 ++Quest Software, Inc. 19,659,375 0.8
270,000 ++VERITAS Software Corporation 38,053,125 1.5
-------------- ------
248,697,500 9.6
Contract 500,000 ++Sanmina Corporation 57,156,250 2.2
Manufacturers 2,673,700 ++Solectron Corporation 117,642,800 4.6
-------------- ------
174,799,050 6.8
Diversified 1,527,450 Corning Incorporated 116,849,925 4.6
Manufacturing 2,740,100 General Electric Company 150,191,731 5.8
-------------- ------
267,041,656 10.4
Electrical 574,000 ++Bookham Technology PLC (ADR)(a) 19,264,875 0.7
Components/
Electronics
Electrical 1,150,000 ++Lattice Semiconductor Corporation 33,637,500 1.3
Components/
Instruments
Energy Equipment & 1,208,000 Enron Corp. 99,131,500 3.8
Services
Energy Technology 575,100 ++Active Power, Inc. 21,889,744 0.8
14,300 ++Capstone Turbine Corporation 790,969 0.0
251,000 ++FuelCell Energy, Inc. 19,217,188 0.7
500,000 ++International Rectifier Corp. 22,312,500 0.9
343,600 ++Proton Energy Systems, Inc. 9,255,725 0.4
-------------- ------
73,466,126 2.8
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Long-Term Investments Value Net Assets
<S> <C> <S> <C> <C>
Financial Services 3,043,000 Associates First Capital Corporation
(Class A) $ 112,971,375 4.4%
Gas Pipeline & 3,848,434 ++TransMontaigne Inc.(b) 14,912,682 0.6
Transmission
Insurance 693,000 American International Group, Inc. 67,914,000 2.6
Internet Services 950,000 ++America Online, Inc. 47,908,500 1.9
Life Sciences 460,000 ++Amgen Inc. 26,622,500 1.0
496,000 ++Millennium Pharmaceuticals, Inc. 35,991,000 1.4
-------------- ------
62,613,500 2.4
Media 476,000 ++Viacom, Inc. (Class A) 27,251,000 1.0
Medical Technology 1,575,000 Medtronic, Inc. 85,542,188 3.3
Pharmaceuticals 330,800 Johnson & Johnson 30,474,950 1.2
719,000 Merck & Co., Inc. 64,665,063 2.5
2,572,150 Pfizer Inc. 111,084,728 4.3
1,470,510 Pharmacia Corporation 80,878,050 3.1
-------------- ------
287,102,791 11.1
Retail 1,161,500 Lowe's Companies, Inc. 53,066,031 2.0
2,035,400 Wal-Mart Stores, Inc. 92,356,275 3.6
-------------- ------
145,422,306 5.6
Semiconductors 1,962,060 Intel Corporation 88,170,071 3.4
500,000 ++Maxim Integrated Products, Inc. 33,125,000 1.3
1,026,500 Motorola, Inc. 25,598,344 1.0
1,080,000 Texas Instruments Incorporated 52,987,500 2.1
519,000 ++Xilinx, Inc. 37,562,625 1.5
-------------- ------
237,443,540 9.3
Telecommunication 66,100 ++Corvis Corporation 4,337,812 0.2
Equipment 650,000 ++Finisar Corporation 18,728,125 0.7
77,100 ++TyCom, Ltd. 2,582,850 0.1
-------------- ------
25,648,787 1.0
Telecommunication 1,495,600 ++McLeodUSA Incorporated (Class A) 28,790,300 1.1
Services 579,500 ++Metawave Communications Corporation 7,642,156 0.3
500,000 ++Netro Corporation 10,875,000 0.4
-------------- ------
47,307,456 1.8
Wireless 12,056,786 Vodafone AirTouch PLC 50,203,212 2.0
Communication
Total Long-Term Investments
(Cost--$2,058,216,443) $2,541,741,799 98.5
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Percent of
Amount Short-Term Investments Value Net Assets
<S> <C> <S> <C> <C>
Commercial Paper* $ 37,635,000 General Motors Acceptance Corp., 6.63% due
11/01/2000 $ 37,635,000 1.4%
Total Short-Term Investments
(Cost--$37,635,000) 37,635,000 1.4
Total Investments (Cost--$2,095,851,443) 2,579,376,799 99.9
Other Assets Less Liabilities 1,369,361 0.1
-------------- ------
Net Assets $2,580,746,160 100.0%
============== ======
*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.
++Non-income producing security.
(a)American Depositary Receipts (ADR).
(b)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:
Net Share Net Dividend
Industry Affiliate Activity Cost Income
Gas Trans-
Pipeline & Montaigne
Transmission Inc. -- -- ++
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of October 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$2,095,851,443) $2,579,376,799
Foreign cash 460,175
Receivables:
Securities sold $ 20,038,061
Beneficial interest sold 1,272,871
Dividends 489,956 21,800,888
--------------
Prepaid registration fees and other assets 130,854
--------------
Total assets 2,601,768,716
--------------
Liabilities: Payables:
Beneficial interest redeemed 13,944,002
Securities purchased 1,595,550
Investment adviser 1,420,160
Distributor 1,172,283 18,131,995
--------------
Accrued expenses and other liabilities 2,890,561
--------------
Total liabilities 21,022,556
--------------
Net Assets: Net assets $2,580,746,160
==============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 2,673,786
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 4,428,259
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 396,450
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 2,810,034
Paid-in capital in excess of par 1,913,852,009
Undistributed realized capital gains on investments and
foreign currency transactions--net 173,073,651
Unrealized appreciation on investments and foreign currency
transactions--net 483,511,971
--------------
Net assets $2,580,746,160
==============
Net Asset Value: Class A--Based on net assets of $701,996,556 and
26,737,856 shares of beneficial interest outstanding $ 26.25
==============
Class B--Based on net assets of $1,052,704,873 and
44,282,595 shares of beneficial interest outstanding $ 23.77
==============
Class C--Based on net assets of $93,549,189 and
3,964,498 shares of beneficial interest outstanding $ 23.60
==============
Class D--Based on net assets of $732,495,542 and
28,100,338 shares of beneficial interest outstanding $ 26.07
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended October 31, 2000
<S> <S> <C> <C>
Investment Dividends (net of $353,114 foreign withholding tax) $ 11,517,912
Income: Interest and discount earned 3,663,198
--------------
Total income 15,181,110
--------------
Expenses: Investment advisory fees $ 19,782,243
Account maintenance and distribution fees--Class B 12,729,452
Transfer agent fees--Class B 3,091,563
Account maintenance fees--Class D 2,077,024
Transfer agent fees--Class D 1,806,318
Transfer agent fees--Class A 1,795,949
Account maintenance and distribution fees--Class C 1,105,562
Custodian fees 320,468
Transfer agent fees--Class C 289,185
Printing and shareholder reports 285,443
Accounting services 254,181
Trustees' fees and expenses 115,378
Professional fees 106,998
Registration fees 48,730
Pricing fees 25,002
Other 76,870
--------------
Total expenses before reimbursement 43,910,366
Reimbursement of expenses (943,188)
--------------
Total expenses after reimbursement 42,967,178
--------------
Investment loss--net (27,786,068)
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 460,441,458
(Loss) on Foreign currency transactions--net (1,819,150) 458,622,308
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net (34,572,089)
Foreign currency transactions--net (13,305) (34,585,394)
-------------- ---------------
Net Increase in Net Assets Resulting from Operations $ 396,250,846
===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended October 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment loss--net $ (27,786,068) $ (19,595,562)
Realized gain (loss) on investments and
foreign currency transactions--net 458,622,308 (223,616,559)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (34,585,394) 139,816,935
-------------- --------------
Net increase (decrease) in net assets
resulting from operations 396,250,846 (103,395,186)
-------------- --------------
Dividends to In excess of investment income--net:
Shareholders: Class A -- (9,908,351)
Class B -- (10,381,062)
Class C -- (879,414)
Class D -- (8,144,104)
-------------- --------------
Net decrease in net assets resulting from
dividends to shareholders -- (29,312,931)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (688,286,498) (1,972,727,295)
Transactions: -------------- --------------
Net Assets: Total decrease in net assets (292,035,652) (2,105,435,412)
Beginning of year 2,872,781,812 4,978,217,224
-------------- --------------
End of year $2,580,746,160 $2,872,781,812
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Growth Fund
October 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 23.18 $ 22.71 $ 33.13 $ 26.87 $ 23.13
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income (loss)--net (.11) (.01) .46 .53 .31
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 3.18 .69 (8.47) 7.98 5.63
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.07 .68 (8.01) 8.51 5.94
---------- ---------- ---------- ---------- ----------
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)
In excess of realized gain on
investments--net -- -- (.23) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- (.21) (2.41) (2.25) (2.20)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 26.25 $ 23.18 $ 22.71 $ 33.13 $ 26.87
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 13.24% 3.09% (25.83%) 34.03% 28.15%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, net of reimbursement .88% .96% .81% .77% .80%
Average ========== ========== ========== ========== ==========
Net Assets: Expenses .91% .99% .85% .81% .84%
========== ========== ========== ========== ==========
Investment income (loss)--net (.38%) (.03%) 1.72% 1.84% 1.28%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 701,997 $ 774,287 $1,111,166 $1,769,296 $1,056,870
========== ========== ========== ========== ==========
Portfolio turnover 66.49% 101.71% 24.41% 24.75% 30.01%
========== ========== ========== ========== ==========
*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, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class B++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 21.21 $ 20.88 $ 30.63 $ 25.03 $ 21.60
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income (loss)--net (.35) (.19) .17 .22 .06
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 2.91 .61 (7.80) 7.39 5.26
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.56 .42 (7.63) 7.61 5.32
---------- ---------- ---------- ---------- ----------
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)
In excess of realized gain on
investments--net -- -- (.23) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- (.09) (2.12) (2.01) (1.89)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 23.77 $ 21.21 $ 20.88 $ 30.63 $ 25.03
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 12.07% 2.06% (26.57%) 32.62% 26.84%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, net of reimbursement 1.90% 1.99% 1.83% 1.79% 1.82%
Average ========== ========== ========== ========== ==========
Net Assets: Expenses 1.93% 2.02% 1.87% 1.83% 1.85%
========== ========== ========== ========== ==========
Investment income (loss)--net (1.40%) (.98%) .70% .82% .26%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $1,052,705 $1,247,547 $2,544,979 $4,687,523 $2,916,507
========== ========== ========== ========== ==========
Portfolio turnover 66.49% 101.71% 24.41% 24.75% 30.01%
========== ========== ========== ========== ==========
*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, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class C++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 21.05 $ 20.72 $ 30.43 $ 24.89 $ 21.59
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income(loss)--net (.36) (.18) .17 .22 .06
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 2.91 .59 (7.75) 7.34 5.23
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.55 .41 (7.58) 7.56 5.29
---------- ---------- ---------- ---------- ----------
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)
In excess of realized gain on
investments--net -- -- (.23) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- (.08) (2.13) (2.02) (1.99)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 23.60 $ 21.05 $ 20.72 $ 30.43 $ 24.89
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 12.11% 2.04% (26.60%) 32.63% 26.84%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.92% 2.02% 1.84% 1.80% 1.84%
Net Assets: ========== ========== ========== ========== ==========
Expenses 1.95% 2.05% 1.88% 1.84% 1.87%
========== ========== ========== ========== ==========
Investment income (loss)--net (1.42%) (.96%) .68% .81% .25%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 93,549 $ 106,797 $ 239,445 $ 427,377 $ 187,221
========== ========== ========== ========== ==========
Portfolio turnover 66.49% 101.71% 24.41% 24.75% 30.01%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived Class D++
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 23.07 $ 22.63 $ 33.01 $ 26.79 $ 23.06
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income(loss)--net (.17) (.06) .39 .46 .24
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 3.17 .68 (8.43) 7.95 5.63
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.00 .62 (8.04) 8.41 5.87
---------- ---------- ---------- ---------- ----------
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)
In excess of realized gain on
investments--net -- -- (.23) -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions -- (.18) (2.34) (2.19) (2.14)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 26.07 $ 23.07 $ 22.63 $ 33.01 $ 26.79
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 13.00% 2.82% (26.00%) 33.67% 27.83%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.13% 1.21% 1.06% 1.02% 1.05%
Net Assets: ========== ========== ========== ========== ==========
Expenses 1.16% 1.24% 1.10% 1.06% 1.08%
========== ========== ========== ========== ==========
Investment income (loss)--net (.63%) (.26%) 1.47% 1.59% 1.03%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 732,495 $ 744,151 $1,082,627 $1,642,665 $ 932,811
========== ========== ========== ========== ==========
Portfolio turnover 66.49% 101.71% 24.41% 24.75% 30.01%
========== ========== ========== ========== ==========
*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, 2000
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 conformity with accounting principles generally accepted
in the United States of America, 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses mayarise 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, 2000
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 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.
(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--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/tax differences of $1,819,150 have been reclassified
between accumulated net investment loss and undistributed net
realized capital gains and $29,605,218 has been reclassified between
paid-in capital in excess of par and accumulated net investment
loss. 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 Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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 FAM Distributors,
Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLIM 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, 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,
2000, MLIM earned fees of $19,782,243, of which $943,188 was waived.
Merrill Lynch Growth Fund
October 31, 2000
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 subagreement 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, 2000, FAMD 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:
FAMD MLPF&S
Class A $1,241 $ 12,811
Class D $8,155 $111,279
For the year ended October 31, 2000, MLPF&S received contingent
deferred sales charges of $1,540,227 and $17,289 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$176,709 and $51,020 relating to transactions subject to front-end
sales charge waivers in Class A and Class D Shares, respectively.
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 MLIM.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLIM, PSI, FDS, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 2000 were $1,948,424,841 and
$2,568,981,518, respectively.
Net realized gains (losses) for the year ended October 31, 2000 and
net unrealized gains (losses) as of October 31, 2000 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 458,429,338 $ 483,525,356
Options written 2,012,120 --
Foreign currency
transactions (1,819,150) (13,385)
------------- -------------
Total $ 458,622,308 $ 483,511,971
============= =============
Transactions in options written for the year ended October 31, 2000,
were as follows:
Nominal Value
Covered by
Written Premiums
Call Options Written Options Received
Outstanding call options
written, beginning of
year 1,181,350 $ 3,471,380
Options exercised (300,000) (1,459,260)
Options expired (881,350) (2,012,120)
------------- -------------
Outstanding call options
written, end of year -- $ --
============= =============
As of October 31, 2000, net unrealized appreciation for Federal
income tax purposes aggregated $483,525,356, of which $636,121,796
related to appreciated securities and $152,596,440 related to
depreciated securities. At October 31, 2000, the aggregate cost of
investments for Federal income tax purposes was $2,095,851,443.
Merrill Lynch Growth Fund
October 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
4. Shares of Beneficial Interest:
Net decrease in net assets derived from beneficial interest
transactions was $688,286,498 and $1,972,727,295 for the years ended
October 31, 2000 and October 31, 1999, respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 8,303,223 $ 231,732,963
Shares redeemed (14,966,652) (416,864,322)
------------- -------------
Net decrease (6,663,429) $ (185,131,359)
============= =============
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 B Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 8,093,155 $ 204,494,655
Automatic conversion of
shares (3,754,743) (94,085,703)
Shares redeemed (18,883,341) (473,345,029)
------------- -------------
Net decrease (14,544,929) $ (362,936,077)
============= =============
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 C Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 386,278 $ 9,655,945
Shares redeemed (1,494,230) (37,162,786)
------------- -------------
Net decrease (1,107,952) $ (27,506,841)
============= =============
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 D Shares for the Year Dollar
Ended October 31, 2000 Shares Amount
Shares sold 3,660,286 $ 101,508,624
Automatic conversion of
shares 3,439,133 94,085,703
------------- ---------------
Total issued 7,099,419 195,594,327
Shares redeemed (11,249,787) (308,306,548)
------------- ---------------
Net decrease (4,150,368) $ (112,712,221)
============= ===============
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)
============= ===============
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds
managed by MLIM and its affiliates, entered into a $1,000,000,000
credit agreement with Bank of America, N.A. and certain other
lenders. The Fund may borrow under the credit agreement to fund
shareholder redemptions and for other lawful purposes other than for
leverage. The Fund may borrow up to the maximum amount allowable
under the Fund's current prospectus and statement of additional
information, subject to various other legal, regulatory or
contractual limits. The Fund pays a commitment fee of .09% per annum
based on the Fund's pro rata share of the unused portion of the
facility. Amounts borrowed under the facility bear interest at a
rate equal to, at each fund's election, the Federal Funds rate plus
.50% or a base rate as determined by Bank of America, N.A. The Fund
did not borrow under the facility during the year ended October 31,
2000.
Merrill Lynch Growth Fund
October 31, 2000
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, 2000, 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 auditing standards
generally accepted in the United States of America. 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, 2000 by
correspondence with the custodian and broker. 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, 2000, the results of its
operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
December 15, 2000
Merrill Lynch Growth Fund
October 31, 2000
PORTFOLIO INFORMATION (unaudited)
As of October 31, 2000
Percent of
Ten Largest Equity Holdings Net Assets
General Electric Company 5.8%
Solectron Corporation 4.5
Corning Incorporated 4.5
Associates First Capital Corporation
(Class A) 4.4
Pfizer Inc. 4.3
Cisco Systems, Inc. 4.0
Microsoft Corporation 3.9
EMC Corporation 3.9
Enron Corp. 3.8
Wal-Mart Stores, Inc. 3.6
Percent of
Geographic Allocation Net Assets
United States 96.5%
United Kingdom 2.0
Merrill Lynch Growth Fund
October 31, 2000
OFFICERS AND TRUSTEES
Terry K. Glenn, President and Trustee
James H. Bodurtha, Trustee
Herbert I. London, 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
