MERRILL LYNCH
FUNDAMENTAL
GROWTH
FUND, INC.
FUND LOGO
Quarterly Report
November 30, 1995
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Steven B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Lawrence R. Fuller, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
Chase MetroTech Center
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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.
<PAGE>
Merrill Lynch
Fundamental
Growth Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
DEAR SHAREHOLDER
For the fiscal quarter ended November 30, 1995, total returns for
Merrill Lynch Fundamental Growth Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were +10.12%, +9.82%, +9.82%, and
+10.05%, respectively, outperforming the total return of +8.38% for
the unmanaged Standard & Poor's 500 Index (S&P 500). (Complete
performance information, including average annual total returns, can
be found on pages 3, 4 and 5 of this report to shareholders.) Almost
one-half of the stocks in the portfolio, including all of the Fund's
top ten holdings, had total returns which were substantially greater
than the total return for the S&P 500. (See page 5 of this report
for the top ten holdings.) During the November quarter, the Fund
remained fully invested, ending the quarter with cash reserves of
6.2% of net assets, compared to cash reserves of 7.5% at the end of
the August quarter.
The Environment
The domestic economy continues to exhibit signs of a continued
slowdown in real economic activity. The reduced rates of growth in
consumer demand for motor vehicles, housing and related durable
goods are being joined by slower rates of growth in business
investment spending. Also, the rates of real economic growth in
Europe and Asia appear to be slowing, affecting US exports of
commodities and manufactured industrial equipment. Even the rapid
pace of capital investment in information processing and
telecommunications equipment in the United States appears to be
slowing, as reflected in recent industry surveys.
<PAGE>
Investment Strategy
Our investment focus is concentrated primarily on large-
capitalization global growth companies which have demonstrated the
ability to produce consistent growth in earnings even through
periods of relatively slow real economic growth in the United
States. The largest weighting continues to be in pharmaceuticals. We
have increased the weighting from 11.6% of net assets to 17.1% since
the August quarter. The top ten industry sectors were equal to 58.3%
of net assets at the end of the November quarter. Investments in the
consumer nondurables and services industry sectors represent well
over 50% of the Fund's net assets, while investments in the
technology sector are well below the sector weighting in the S&P 500
(9% compared to 15%). We believe a continuation of a relatively slow
pace of real economic growth may benefit the consumer nondurable
goods and services sector.
Portfolio Matters
We held investments in 46 companies by November quarter-end,
unchanged from the number of holdings at the end of the August
quarter. During the November quarter, we added seven and eliminated
seven companies from the Fund. Capital gains were realized on five
of the seven companies eliminated. We sold Bay Networks Inc.,
Hewlett-Packard Co. and Scholastic Corp. with capital gains on the
basis of relatively high valuations. We added Transport Holdings
Inc. to the Fund as the result of a stock distribution from The
Travelers Group Inc. We sold the stock at a capital gain in response
to its valuation. We added Dell Computer Corp. to the Fund and
subsequently sold it at a capital gain after we received information
on computer purchasing intentions which caused us to reduce our
growth expectations for the domestic desktop computer market in
1996. Capital losses were realized with the eliminations of
Haemonetics Corp. and The Pep Boys--Manny, Moe & Jack from the
portfolio. In both cases, there were negative changes in the
competitive environment for these companies, leading us to expect a
deterioration in the outlooks for growth in earnings and stock price
appreciation.
Other companies introduced to the Fund were Computer Associates
International, Inc., Enron Corp., General Electric Co., Primark
Corporation, and Schering-Plough Corp. Computer Associates
International, Inc. could show an accelerated growth of earnings as
the result of recent acquisitions and unique products for the
corporate network software market. We believe Enron Corp. has an
attractive stock valuation and a management approach conducive to
producing relatively stable and above-average growth in earnings in
the energy business. We also believe General Electric Co. has an
attractive valuation and a demonstrated record of relatively stable
and above-average growth in earnings. Primark Corporation is a
relatively rapid growth company in the information services
industry. It provides unique technology-based information services
and global financial and economic data bases to a wide range of
private and governmental customers. The valuation appears attractive
in comparison to peer group companies. Schering-Plough Corp. has an
attractive valuation relative to its growth rate among the top tier
of pharmaceutical companies, in our opinion. Finally, First Data
Corp. became a major portfolio holding as a result of the company's
acquisition of the Fund's holding of First Financial Management
Corp.
<PAGE>
In Conclusion
The Fund's investment returns during the November quarter appear to
show an investor shift toward the large-capitalization, global
growth companies which are characteristic of the consumer nondurable
goods and services sector and of the majority of the stock holdings
in the Fund.
We thank you for your continued investment in Merrill Lynch
Fundamental Growth Fund, Inc., and we look forward to discussing
with you our investment activities and strategy in the upcoming semi-
annual report.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Lawrence R. Fuller)
Lawrence R. Fuller
Vice President and Portfolio Manager
January 3, 1996
PERFORMANCE DATA
<PAGE>
About Fund Performance
Since October 21, 1994, investors have been 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, as detailed in the Fund's prospectus. If you were a Class
A shareholder prior to October 21, 1994, your Class A Shares were
redesignated to Class D Shares on October 21, 1994, which, in the
case of certain eligible investors, were simultaneously exchanged
for Class A Shares.
* 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 8 years. If you were a Class B shareholder
prior to October 21, 1994, your Class B Shares were redesignated to
Class C Shares on October 21, 1994.
* 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).
Data for all of the Fund's shares are presented in the "Recent
Performance Results" and "Performance Summary" tables on pages 4 and
5. Data for Class A Shares and Class B Shares are also presented in
the "Aggregate Total Return" tables below. Data for the Fund's Class
C and Class D Shares are presented in the "Average Annual Total
Return" tables below.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for all of the Fund's
shares for the 12-month and 3-month periods ended November 30, 1995.
All data in this table assume imposition of the actual total
expenses incurred by each class of shares during the relevant
period.
None of the past results shown should 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. 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.
<PAGE>
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94)
through 9/30/95 +26.03% +19.41%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (10/21/94)
through 9/30/95 +24.95% +20.95%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Average Annual Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/95 +25.46% +24.46%
Inception (12/24/92)
through 9/30/95 + 7.79 + 7.79
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/95 +26.46% +19.82%
Inception (12/24/92)
through 9/30/95 + 8.62 + 6.52
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $9.99 $9.62 $0.255 $0.051 - 0.54%
1/1/95-11/30/95 9.62 12.84 -- -- +33.47
------ ------
Total $0.255 Total $0.051
Cumulative total return as of 11/30/95: +32.75%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $9.85 $9.46 $0.255 $0.051 - 0.76%
1/1/95-11/30/95 9.46 12.52 -- -- +32.35
------ ------
Total $0.255 Total $0.051
Cumulative total return as of 11/30/95: +31.35%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares***
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
12/24/92-12/31/92 $10.00 $ 9.92 -- -- - 0.80%
1993 9.92 10.43 -- -- + 5.14
1994 10.43 9.46 $0.255 $0.051 - 6.28
1/1/95-11/30/95 9.46 12.52 -- -- +32.35
------ ------
Total $0.255 Total $0.051
Cumulative total return as of 11/30/95: +29.38%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class B Shares of the Fund outstanding prior to
October 21, 1994 were redesignated Class C Shares.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class D Shares***
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
12/24/92-12/31/92 $10.00 $ 9.92 -- -- - 0.80%
1993 9.92 10.51 -- -- + 5.95
1994 10.51 9.61 $0.255 $0.051 - 5.56
1/1/95-11/30/95 9.61 12.81 -- -- +33.30
------ ------
Total $0.255 Total $0.051
Cumulative total return as of 11/30/95: +32.31%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
***As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 were redesignated Class D Shares.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
11/30/95 8/31/95 11/30/94 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Fundamental Growth Fund, Inc. Class A Shares* $12.84 $11.66 $9.90 +33.25%(1) +10.12%
ML Fundamental Growth Fund, Inc. Class B Shares* 12.52 11.40 9.75 +31.98(1) + 9.82
ML Fundamental Growth Fund, Inc. Class C Shares* 12.52 11.40 9.75 +31.98(1) + 9.82
ML Fundamental Growth Fund, Inc. Class D Shares* 12.81 11.64 9.90 +32.94(1) +10.05
Standard & Poor's 500 Index** 605.37 561.88 453.69 +33.43 + 7.74
ML Fundamental Growth Fund, Inc. Class A Shares--Total Return* +33.95(2) +10.12
ML Fundamental Growth Fund, Inc. Class B Shares--Total Return* +32.69(2) + 9.82
ML Fundamental Growth Fund, Inc. Class C Shares--Total Return* +32.69(2) + 9.82
ML Fundamental Growth Fund, Inc. Class D Shares--Total Return* +33.64(2) +10.05
Standard & Poor's 500 Index--Total Return** +36.93 + 8.38
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**An unmanaged broad-based Index comprised of common stocks. Total
investment returns for unmanaged indexes are based on estimates.
(1)Percent change includes reinvestment of $0.255 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.051 per share ordinary
income dividends and $0.255 per share capital gains distributions.
</TABLE>
PORTFOLIO INFORMATION
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
Johnson & Johnson 4.1%
MCI Communications Corp. 3.9
The Travelers Group Inc. 3.8
Schering-Plough Corp. 3.7
American International Group, Inc. 3.7
Merck & Co., Inc. 3.6
Eastman Kodak Co. 3.6
Procter & Gamble Co. 3.6
First Data Corp. 3.6
Pharmacia & Upjohn, Inc. 3.5
Percent of
Ten Largest Industries Net Assets
Pharmaceuticals 17.1%
Beverages 6.6
Information Processing 5.5
Software--Computer 5.0
Retail Specialty 4.8
Medical--Technology 4.1
Telecommunications 3.9
Financial Services 3.8
Household Products 3.8
Insurance 3.7
Equity Portfolio Changes for the Quarter Ended
November 30, 1995
Additions
<PAGE>
Computer Associates International, Inc.
*Dell Computer Corp.
Enron Corp.
General Electric Co.
Primark Corporation
Schering-Plough Corp.
*Transport Holdings Inc. (Class A)
Deletions
Bay Networks Inc.
*Dell Computer Corp.
Haemonetics Corp.
Hewlett-Packard Co.
The Pep Boys--Manny, Moe & Jack
Scholastic Corp.
*Transport Holdings Inc. (Class A)
[FN]
*Added and deleted in the same quarter.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Percent of
Industries Shares Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Advertising 70,000 Interpublic Group of Companies, Inc. $ 2,610,400 $ 2,686,250 1.6%
Automotive & Truck 20,000 Ek Chor China Motorcycle Co. Ltd. (ADR) (a) 734,300 275,000 0.2
Banking & Financial 10,000 State Street Boston Corp. 352,275 450,000 0.3
Beverages 75,000 The Coca-Cola Co. 4,223,925 5,681,250 3.3
100,000 PepsiCo, Inc. 4,340,109 5,525,000 3.3
------------ ------------ ------
8,564,034 11,206,250 6.6
Chemical Producers 100,000 Duracell International Inc. 4,447,287 5,300,000 3.1
10,000 Great Lakes Chemical Corp. 614,769 711,250 0.4
------------ ------------ ------
5,062,056 6,011,250 3.5
Computers 110,000 Compaq Computer Corp. 4,303,573 5,445,000 3.2
Consumer Products & 150,000 CUC International, Inc. 3,793,501 5,700,000 3.3
Services
<PAGE>
Cosmetics 100,000 The Gillette Co. 3,875,150 5,187,500 3.0
10,000 International Flavors & Fragrances Inc. 483,100 511,250 0.3
------------ ------------ ------
4,358,250 5,698,750 3.3
Electrical Equipment 10,000 Emerson Electric Co. 658,040 780,000 0.4
65,000 General Electric Co. 4,356,190 4,371,250 2.6
------------ ------------ ------
5,014,230 5,151,250 3.0
Electronics 30,000 Intel Corp. 1,908,475 1,822,500 1.1
Energy 50,000 Enron Corp. 1,872,250 1,875,000 1.1
Entertainment 100,000 Viacom, Inc. (Class A) 5,086,791 4,812,500 2.8
20,000 The Walt Disney Co. 1,141,200 1,202,500 0.7
------------ ------------ ------
6,227,991 6,015,000 3.5
Financial Services 110,000 The Travelers Group Inc. 4,952,281 6,545,000 3.8
Food 10,000 Wrigley (Wm.) Jr. Co. (Class B) 436,070 471,250 0.3
Food Merchandising 20,000 Albertson's, Inc. 590,663 615,000 0.4
Hotel 25,000 Marriott International, Inc. 925,240 931,250 0.5
Household Products 5,000 Colgate-Palmolive Co. 373,425 366,250 0.2
70,000 Procter & Gamble Co. 4,702,488 6,046,250 3.6
------------ ------------ ------
5,075,913 6,412,500 3.8
Information Processing 85,000 First Data Corp. (b) 3,997,041 6,035,000 3.6
25,000 General Motors Corp. (Class E) 1,172,750 1,262,500 0.7
75,000 Primark Corporation 2,034,375 2,071,875 1.2
------------ ------------ ------
7,204,166 9,369,375 5.5
<PAGE>
Insurance 70,000 American International Group, Inc. 5,213,206 6,282,500 3.7
Leisure 70,000 PolyGram N.V. (ADR)(a) 3,392,251 4,200,000 2.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Percent of
Industries Shares Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Medical--Technology 80,000 Johnson & Johnson $ 5,769,519 $ 6,930,000 4.1%
Oil Services 10,000 Schlumberger Ltd. 616,850 635,000 0.4
Pharmaceuticals 100,000 Amgen, Inc. 3,273,582 4,962,500 2.9
100,000 Merck & Co., Inc. 5,218,550 6,187,500 3.6
100,000 Pfizer Inc. 3,889,338 5,800,000 3.4
165,000 Pharmacia & Upjohn, Inc. (c) 4,902,245 5,919,375 3.5
110,000 Schering-Plough Corp. 5,723,607 6,311,250 3.7
------------ ------------ ------
23,007,322 29,180,625 17.1
Photography 90,000 Eastman Kodak Co. 5,083,489 6,120,000 3.6
Pollution Control 35,000 WMX Technologies Inc. 1,034,554 1,032,500 0.6
Publishing 50,000 Times Mirror Co. (Class A) 1,425,392 1,625,000 1.0
Restaurant 10,000 McDonald's Corp. 365,170 446,250 0.3
Retail Specialty 182,500 Staples Inc. 3,198,735 4,653,750 2.7
150,000 Toys 'R' Us, Inc. 3,794,885 3,487,500 2.1
------------ ------------ ------
6,993,620 8,141,250 4.8
Software--Computer 50,000 Computer Associates International, Inc. 2,986,357 3,275,000 1.9
60,000 Microsoft Corp. 5,551,162 5,220,000 3.1
------------ ------------ ------
8,537,519 8,495,000 5.0
<PAGE>
Telecommunications 250,000 MCI Communications Corp. 5,799,521 6,656,250 3.9
Toys 170,000 Mattel, Inc. 4,094,705 4,760,000 2.8
Travel & Lodging 45,000 Carnival Corporation (Class A) 1,053,675 1,170,000 0.7
Total Stocks 136,372,461 162,355,000 95.5
Face Amount Short-Term Securities
US Government & $6,625,000 Federal Home Loan Bank, 5.80% due
Agency Obligations* 12/01/1995 6,625,000 6,625,000 3.9
4,000,000 Federal National Mortgage Association,
5.65% due 12/15/1995 3,991,211 3,991,211 2.3
Total Short-Term Securities 10,616,211 10,616,211 6.2
Total Investments $146,988,672 172,971,211 101.7
============
Liabilities in Excess of Other Assets (2,886,198) (1.7)
------------ ------
Net Assets $170,085,013 100.0%
============ ======
Net Asset Class A--Based on net assets of $26,507,489 and
Value: 2,063,912 shares outstanding $ 12.84
============
Class B--Based on net assets of $79,070,968 and
6,316,068 shares outstanding $ 12.52
============
Class C--Based on net assets of $48,542,587 and
3,877,504 shares outstanding $ 12.52
============
Class D--Based on net assets of $15,963,969 and
1,245,951 shares outstanding $ 12.81
============
<PAGE>
<FN>
*Certain US Government & Agency Obligations are traded on a discount
basis; the interest rates shown are the discount rates paid at the
time of purchase by the Fund.
(a)American Depositary Receipts (ADR).
(b)First Data Corp. acquired First Financial Management Corp.
(c)Upjohn Co. merged with Pharmacia AB.
</TABLE>
