MERRILL LYNCH
FUNDAMENTAL
GROWTH
FUND, INC.
FUND LOGO
Quarterly Report
May 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
Fundamental
Growth Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH FUNDAMENTAL GROWTH FUND, INC.
DEAR SHAREHOLDER
For the quarter ended May 31, 1999, total returns for Merrill Lynch
Fundamental Growth Fund, Inc.'s Class A, Class B, Class C and Class
D Shares were +3.62%, +3.32%, +3.35% and +3.55%, respectively. This
compares to the total return of +5.48% for the unmanaged Standard &
Poor's 500 Index (S&P 500) 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 4 and 5 of this report to shareholders.)
The Fund's underperformance relative to the S&P 500 for the May
quarter is the result of the shift in investor sentiment to favor
the energy and energy services industries as well as basic and
manufacturing industries, such as aluminum, steel, paper, chemicals,
motor vehicles, construction and agricultural equipment. In our
view, it is too early to shift investments into the cyclical or
value-investing industries because we appear to be in the late
stages of one of the longest periods of continuous positive growth
in real business activity in US economic history. Also, in the
United States, manufacturing employment in these industries
continues to decline in absolute terms as lower-cost foreign
producers in Asia, Latin America and Eastern Europe continue to take
business away from US producers. The Fund has relatively
insignificant investment weightings in companies in these industry
sectors.
We believe that the Fund's performance benefited during April and
May as a result of our significant reduction of stock holdings in
very large-capitalization growth companies in technology and
retailing industries in late January and early February. Many of
these stocks declined significantly as investors have moved in the
direction of cyclical company stocks in energy and the basic and
industrial industries.
During the May quarter, half of the companies among the Fund's top
ten equity holdings had stock price appreciation significantly
greater than the total return of the unmanaged S&P 500. (See page 10
of this report to shareholders for a list of the Fund's ten largest
holdings and ten largest industries.) The meaningful increase in
long-term US Treasury interest rates during the May quarter had a
negative effect on investment returns among the Fund's top industry
categories, such as telecommunications, banking and financial
services, retailing and pharmaceuticals. On a one-year comparison
basis, the Fund's total return performance is still well above that
of the S&P 500 Index.
The Environment
As we had anticipated at the end of February quarter, increases in
long-term US Treasury interest rates caused a major decline in
residential mortgage financing and a significant slowdown in the
year-to-year monthly rates of growth in consumer spending. Also,
meaningful year-to-year increases in Federal tax refunds to
households during the first quarter of 1999 appear to be having a
declining impact on overall retail sales. We believe that a
significant slowdown in the rate of growth of nominal and real US
consumer spending is taking place. During 1998 and into the first
quarter of 1999, this relatively rapid growth in US consumer
spending provided the final boost for the manufacturing sector
recoveries of business activity in Asia, including Japan, and Latin
America.
Monthly reports on the US labor markets show a continuing decline in
manufacturing employment, as less-expensive producers in Asia, Latin
America and Eastern Europe take market share from US producers of
technology products, apparel, steel, paper, chemicals,
transportation and construction equipment and other industrial
goods. The decline in manufacturing employment has caused a
downtrend in average hourly earnings.
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
The most recent US Labor Department report showed a significant drop
in both manufacturing and construction industry employment levels.
The number of employees laid off by major corporations continues in
an uptrend from both corporate restructuring and new mergers and
consolidations. Recent monthly levels of US automobile sales and new
residential home sales may prove to be the peak levels for some
time. The recent high levels and relatively rapid rates of growth of
real and nominal consumer spending caused the Federal Open Market
Committee to increase the Federal Funds rate 0.25% on June 30, 1999.
This should reduce the rate of growth of liquidity in the financial
system. The monetary stimulus provided by the United States and
other central banks around the world since Septem-ber 1998 appears
to have caused an upturn in most of the world's stock markets and a
robust rate of growth in US consumer spending. In our opinion,
Federal, state and local governments are likely to increase the rate
of growth of public spending and reduce household taxes during the
remainder of 1999 and into the national elections in the year 2000.
It appears that overall operating profits for US corporations
reached a low in the third quarter of 1998 and continue to recover
in terms of year-to-year rates of growth.
Investment Overview and Strategy
During the May quarter, we continued to reduce the Fund's weighting
in technology and some consumer products companies. The proceeds
were reinvested in the telecommunications, medical technology,
insurance, banking and financial services, pharmaceuticals,
specialty retailing and financial services industries. During the
May quarter, we eliminated Baan Company NV, Telefonaktiebolaget LM
Ericsson, FORE Systems, Inc., Network Appliance, Inc., Newbridge
Networks Corporation, Nextel Communications, Inc., PeopleSoft, Inc.,
STMicroelectronics NV and Viacom, Inc. We believe that there is an
ongoing overall slowdown in the rate of growth of spending on
computer equipment and related software as well as communications
infrastructure in the wireless communications sector, which may
produce shortfalls in anticipated earnings for many technology
companies during the second half of 1999. Also, the valuations for
the companies that we eliminated appeared high relative to our
expectations for the intermediate-term business prospects.
During the May quarter, we added two new companies to the portfolio:
Abbott Laboratories and The Hartford Financial Services Group, Inc.
We believe Abbott Laboratories' stock valuation is very attractive
relative to expectations of an increase in the rate of growth of
earnings and rates of return on assets as new executive leadership
within the company orchestrates restructuring its businesses. We
view the valuation of The Hartford Financial Services Group, Inc. as
attractive relative to prospects for improved rates of return and
faster earnings growth from internal restructuring by the existing
management.
Our investment focus has been on large-capitalization companies with
above-average earnings growth prospects. Our emphasis on companies
in the telecommunications, banking and financial, pharmaceuticals,
specialty retailing, insurance and financial services industries
reflects our business and economic outlook for the remainder of
1999. We anticipate relatively moderate real growth in the
industrialized economies around the world with the US economy
continuing to experience more rapid growth in consumer spending,
even with a slowdown in growth rates during the remainder of 1999,
in comparison to the other major industrialized countries. Since the
slowdown in the growth of US consumer spending appears likely, we
expect US Treasury long-term interest rates to decline and lead to a
new round of consumer mortgage financings and a restart of a higher
growth rate in spending. In our opinion, a recovery in employment
growth in the US industrial sector is going to require a substantial
decline in the value of the US dollar relative to the currencies of
the other major manufacturing economies in Asia, Euroland (those
European countries that comprise the European Union) and Latin
America.
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
In Conclusion
We believe that we will continue to find attractive equity
investment opportunities. We are likely to add to the number of
portfolio companies as part of our ongoing shift from the largest-
capitalization growth companies with relatively higher stock
valuations to companies with more moderate valuations. We began this
process of changing the industry structure and strategy of the Fund
in the February quarter and continued the process during the May
quarter. We continue to believe that US policymakers appear to have
one of the best blends of monetary and fiscal policies, which we
believe could foster a continued growth of overall employment,
business activity and corporate profits.
We thank you for your continued investment in Merrill Lynch
Fundamental Growth Fund, Inc., and we look forward to serving your
investment needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Lawrence R. Fuller)
Lawrence R. Fuller
Senior Vice President and
Portfolio Manager
July 9, 1999
Merrill Lynch Fundamental Growth Fund, Inc.
May 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, 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. However, in the
case of certain eligible investors, the shares 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. (There is no initial sales charge for
automatic share conversions.) 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).
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.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Fundamental Growth Fund, Inc. Class A Shares* +27.70% +3.62% +204.56%
ML Fundamental Growth Fund, Inc. Class B Shares* +26.43 +3.32 +190.47
ML Fundamental Growth Fund, Inc. Class C Shares* +26.45 +3.35 +186.19
ML Fundamental Growth Fund, Inc. Class D Shares* +27.43 +3.55 +200.82
Standard & Poor's 500 Index** +21.03 +5.48 +207.05/+241.36
<FN>
*Investment results shown do not reflect sales charges; results
shown 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 since inception periods are Class A & Class B Shares, from
10/21/94 to 5/31/99 and Class C & Class D Shares, from 12/24/92 to
5/31/99.
**An unmanaged broad-based Index comprised of common stocks. Since
inception total returns are from 10/21/94 to 5/31/99 and from
12/24/92 to 5/31/99, respectively.
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/99 +29.52% +22.72%
Inception (10/21/94)
through 3/31/99 +28.73 +27.18
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 +28.28% +24.28%
Inception (10/21/94)
through 3/31/99 +27.42 +27.42
[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 3/31/99 +28.23% +27.23%
Five Years Ended 3/31/99 +24.65 +24.65
Inception (12/24/92)
through 3/31/99 +18.45 +18.45
[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 3/31/99 +29.18% +22.40%
Five Years Ended 3/31/99 +25.63 +24.28
Inception (12/24/92)
through 3/31/99 +19.37 +18.35
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Advertising 300,000 The Interpublic Group of Companies, Inc. $ 18,003,596 $ 22,725,000 0.7%
Banking & Financial 1,125,000 Bank of America Corporation 72,899,695 72,773,437 2.1
1,200,000 Bank One Corporation 60,314,384 67,875,000 1.9
1,400,000 Citigroup Inc. 84,325,769 92,750,000 2.7
2,400,000 Mellon Bank Corporation 78,537,201 85,650,000 2.5
328,100 State Street Corporation 19,742,087 25,017,625 0.7
-------------- -------------- ------
315,819,136 344,066,062 9.9
Beverages 150,000 The Coca-Cola Company 12,674,176 10,246,875 0.3
Broadcasting-- 500,000 CBS Corporation 15,516,415 20,875,000 0.6
Radio & Television 445,000 Chancellor Media Corporation 20,378,648 22,583,750 0.6
625,000 Clear Channel Communications, Inc. 28,637,184 41,289,062 1.2
1,200,000 Infinity Broadcasting Corp. (Class A) 29,172,154 30,675,000 0.9
-------------- -------------- ------
93,704,401 115,422,812 3.3
Chemicals 915,000 E.I. du Pont de Nemours and Company 56,444,071 59,875,312 1.7
Communications 1,300,000 Cisco Systems, Inc. 87,069,915 141,618,750 4.1
Equipment 60,000 Lucent Technologies Inc. 2,653,851 3,412,500 0.1
30,000 Nortel Networks Corporation 1,566,687 2,250,000 0.0
-------------- -------------- ------
91,290,453 147,281,250 4.2
Computers 275,000 Compaq Computer Corporation 9,877,312 6,514,062 0.2
140,000 Dell Computer Corporation 3,689,656 4,812,500 0.1
900,000 International Business Machines Corporation 77,986,902 104,681,250 3.0
-------------- -------------- ------
91,553,870 116,007,812 3.3
Cosmetics 125,000 The Gillette Company 5,897,622 6,375,000 0.2
24,266 International Flavors & Fragrances Inc. 1,157,165 997,939 0.0
-------------- -------------- ------
7,054,787 7,372,939 0.2
Diversified 860,000 Minnesota Mining and Manufacturing
Electrical Company (3M) 67,814,465 73,745,000 2.1
Equipment 134,699 Emerson Electric Co. 7,865,190 8,603,899 0.3
1,300,000 General Electric Company 111,189,404 132,193,750 3.8
12,133 Honeywell Inc. 925,783 1,148,085 0.0
-------------- -------------- ------
119,980,377 141,945,734 4.1
Electronics 200,000 Intel Corporation 11,556,564 10,862,500 0.3
30,000 Texas Instruments Incorporated 1,890,231 3,281,250 0.1
-------------- -------------- ------
13,446,795 14,143,750 0.4
Energy 1,200,000 El Paso Energy Corporation 43,940,242 43,275,000 1.3
160,000 Enron Corp. 10,917,243 11,420,000 0.3
-------------- -------------- ------
54,857,485 54,695,000 1.6
Entertainment 200,000 AT&T Corp.--Liberty Media Group (Class A) 5,277,527 13,287,500 0.4
1,600,000 The Walt Disney Company 53,960,022 46,600,000 1.3
-------------- -------------- ------
59,237,549 59,887,500 1.7
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Financial Services 67,283 American Express Company $ 6,728,783 $ 8,153,859 0.2%
350,000 Federal Home Loan Mortgage Association 21,034,671 20,409,375 0.6
600,000 Federal National Mortgage Association 40,493,143 40,800,000 1.2
240,200 Franklin Resources, Inc. 12,091,393 10,448,700 0.3
615,000 Morgan Stanley Dean Witter & Co. 52,749,851 59,347,500 1.7
449,400 T. Rowe Price Associates, Inc. 16,733,626 17,358,075 0.5
-------------- -------------- ------
149,831,467 156,517,509 4.5
Food Merchandising 551,800 Albertson's, Inc. 28,438,123 29,521,300 0.9
400,000 The Kroger Co. 19,038,228 23,425,000 0.7
175,000 Safeway Inc. 8,673,652 8,137,500 0.2
-------------- -------------- ------
56,150,003 61,083,800 1.8
Foods 75,000 ConAgra, Inc. 1,834,821 1,954,687 0.1
60,665 Wm. Wrigley Jr. Company 4,533,973 5,281,647 0.1
-------------- -------------- ------
6,368,794 7,236,334 0.2
Healthcare 7,888 Coram Healthcare Corp. (Warrants)(b) 0 0 0.0
Home Furnishings 532,500 Ethan Allen Interiors, Inc. 18,274,523 16,973,438 0.5
Hotels 175,000 Marriott International, Inc. (Class A) 5,813,048 6,660,938 0.2
Household Products 20,000 Colgate-Palmolive Company 1,579,466 1,997,500 0.1
550,000 Kimberly-Clark Corporation 28,094,133 32,278,125 0.9
500,000 The Procter & Gamble Company 42,429,053 46,687,500 1.3
415,179 Unilever NV (NY Registered Shares) 33,048,690 27,116,350 0.8
-------------- -------------- ------
105,151,342 108,079,475 3.1
Information 700,000 America Online, Inc. 27,083,065 83,562,500 2.4
Processing 1,100,000 First Data Corporation 42,978,896 49,431,250 1.4
-------------- -------------- ------
70,061,961 132,993,750 3.8
Insurance 400,000 Aetna Inc. 35,231,699 36,325,000 1.0
600,000 American International Group, Inc. 59,301,417 68,587,500 2.0
1,000,000 The Hartford Financial Services Group, Inc. 57,609,421 63,250,000 1.8
-------------- -------------- ------
152,142,537 168,162,500 4.8
Medical Technology 1,000,000 Abbott Laboratories 49,813,219 45,187,500 1.3
1,200,000 Boston Scientific Corporation 36,347,724 45,525,000 1.3
40,000 Guidant Corporation 1,502,734 2,000,000 0.0
24,266 Johnson & Johnson 1,280,674 2,247,638 0.1
-------------- -------------- ------
88,944,351 94,960,138 2.7
Oil Services 70,000 Baker Hughes Incorporated 2,439,891 2,178,750 0.1
36,000 Diamond Offshore Drilling, Inc. 1,584,456 981,000 0.0
30,000 Schlumberger Limited 2,064,088 1,805,625 0.1
-------------- -------------- ------
6,088,435 4,965,375 0.2
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Pharmaceuticals 200,000 Amgen Inc. $ 10,188,692 $ 12,650,000 0.4%
1,725,000 Bristol-Myers Squibb Company 93,196,841 118,378,125 3.4
1,550,000 Merck & Co., Inc. 98,285,712 104,625,000 3.0
811,000 Pfizer Inc. 87,338,779 86,777,000 2.5
-------------- -------------- ------
289,010,024 322,430,125 9.3
Photography 13,000 Eastman Kodak Company 906,493 879,125 0.0
Pollution Control 200,000 Waste Management, Inc. 9,741,420 10,575,000 0.3
Publishing 165,450 Gannett Co., Inc. 11,654,521 11,953,762 0.4
Restaurants 200,000 McDonald's Corporation 6,091,574 7,700,000 0.2
Retail--Specialty 255,000 Abercrombie & Fitch Co. (Class A) 14,920,867 21,451,875 0.6
950,000 CVS Corporation 37,995,549 43,700,000 1.3
100,000 The Gap, Inc. 3,787,727 6,256,250 0.2
652,120 Lowe's Companies, Inc. 31,758,566 33,869,483 1.0
1,000,000 Staples, Inc. 21,922,629 28,687,500 0.8
150,000 Tommy Hilfiger Corporation 9,501,307 11,259,375 0.3
1,900,000 Walgreen Co. 43,100,122 44,175,000 1.3
-------------- -------------- ------
162,986,767 189,399,483 5.5
Retail--Stores 580,000 The TJX Companies, Inc. 18,097,483 17,400,000 0.5
1,100,000 Wal-Mart Stores, Inc. 32,058,099 46,887,500 1.4
-------------- -------------- ------
50,155,582 64,287,500 1.9
Semiconductors 80,000 Applied Materials, Inc. 2,575,774 4,400,000 0.1
Software-- 250,000 Microsoft Corporation 14,122,212 20,171,875 0.6
Computer 1,850,000 SAP AG (Systeme, Anwendungen, Produkte in
der Datenverarbeitung)(ADR)(a) 62,791,177 62,206,250 1.8
-------------- -------------- ------
76,913,389 82,378,125 2.4
Telecommunications 2,450,000 AT&T Corp. 130,128,547 135,975,000 3.9
260,000 Ameritech Corporation 14,675,358 17,111,250 0.5
100,000 Cable & Wireless PLC (ADR)(a) 4,001,353 3,825,000 0.1
600,000 Equant (NY Registered Shares) 45,510,453 49,762,500 1.4
1,070,000 GTE Corporation 62,053,707 67,476,875 2.0
700,000 MCI WorldCom Inc. 39,838,365 60,418,750 1.8
885,000 Sprint Corp. (FON Group) 60,820,578 99,783,750 2.9
800,000 Sprint Corp. (PCS Group) 14,935,542 36,000,000 1.0
200,000 Vodafone Group PLC (ADR)(a) 36,451,121 38,275,000 1.1
-------------- -------------- ------
408,415,024 508,628,125 14.7
Toys 303,325 Mattel, Inc. 11,546,515 8,019,155 0.2
Travel & Lodging 820,000 Carnival Corporation 28,916,041 33,620,000 1.0
Total Stocks 2,719,620,746 3,169,318,703 91.3
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Percent of
Amount Short-Term Securities Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Commercial AT&T Corp.:
Paper* $25,000,000 4.79% due 6/01/1999 $ 24,990,021 $ 24,990,021 0.7%
25,000,000 4.78% due 6/07/1999 24,970,125 24,970,125 0.7
30,000,000 CSW Credit Inc., 4.82% due 7/06/1999 29,847,367 29,847,367 0.9
25,000,000 Ford Motor Credit Company, 4.81% due
7/09/1999 24,863,049 24,863,049 0.7
48,001,000 General Motors Acceptance Corp., 4.94% due
6/01/1999 47,981,240 47,981,240 1.4
45,000,000 Lucent Technologies Inc., 4.79% due 6/22/1999 44,856,300 44,856,300 1.3
Metropolitan Life Insurance Company:
15,000,000 4.79% due 6/02/1999 14,992,017 14,992,017 0.4
25,000,000 4.78% due 6/10/1999 24,960,167 24,960,167 0.7
25,000,000 Newell Company, 4.78% due 6/11/1999 24,956,847 24,956,847 0.7
-------------- -------------- ------
262,417,133 262,417,133 7.5
US Government Federal Home Loan Mortgage Corporation:
Agency Obligations* 40,000,000 4.75% due 6/04/1999 39,968,333 39,968,333 1.2
50,000,000 4.72% due 6/17/1999 49,875,444 49,875,444 1.4
50,000,000 4.71% due 7/09/1999 49,731,792 49,731,792 1.4
40,000,000 Federal National Mortgage Association,
4.75% due 6/18/1999 39,894,444 39,894,444 1.2
-------------- -------------- ------
179,470,013 179,470,013 5.2
Total Short-Term Securities 441,887,146 441,887,146 12.7
Total Investments $3,161,507,892 3,611,205,849 104.0
==============
Liabilities in Excess of Other Assets (139,601,583) (4.0)
-------------- ------
Net Assets $3,471,604,266 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $456,246,058 and
20,418,910 shares outstanding $ 22.34
==============
Class B--Based on net assets of $1,949,803,707 and
92,211,952 shares outstanding $ 21.14
==============
Class C--Based on net assets of $302,396,287 and
14,212,537 shares outstanding $ 21.28
==============
Class D--Based on net assets of $763,158,214 and
34,471,696 shares outstanding $ 22.14
==============
<FN>
(a)American Depositary Receipts (ADR).
(b)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.
*Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
PORTFOLIO INFORMATION
As of May 31, 1999
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
Cisco Systems, Inc. 4.1%
AT&T Corp. 3.9
General Electric Company 3.8
Bristol-Myers Squibb Company 3.4
International Business Machines
Corporation 3.0
Merck & Co., Inc. 3.0
Sprint Corp. (FON Group) 2.9
Citigroup Inc. 2.7
Pfizer Inc. 2.5
Mellon Bank Corporation 2.5
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 14.7%
Banking & Financial 9.9
Pharmaceuticals 9.3
Retail--Specialty 5.5
Insurance 4.8
Financial Services 4.5
Communications Equipment 4.2
Electrical Equipment 4.1
Information Processing 3.8
Computers 3.3
Equity Portfolio Changes for the
Quarter Ended May 31, 1999
Additions
Abbott Laboratories
The Hartford Financial Services Group, Inc.
Deletions
Baan Company NV
FORE Systems, Inc.
Network Appliance, Inc.
Newbridge Networks Corporation
Nextel Communications, Inc. (Class A)
PeopleSoft, Inc.
STMicroelectronics NV (NY Registered Shares)
Telefonaktiebolaget LM Ericsson (ADR)
Viacom, Inc. (Class A)
Merrill Lynch Fundamental Growth Fund, Inc.
May 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Arthur Zeikel, Director
Lawrence R. Fuller, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Barbara G. Fraser, Secretary
Custodian
The Chase Manhattan Bank
Global Securities Services
Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
