MERRILL LYNCH
FUNDAMENTAL
GROWTH
FUND, INC.
FUND LOGO
Quarterly Report
November 30, 1998
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 November 30, 1998, total returns for Merrill
Lynch Fundamental Growth Fund, Inc.'s Class A, Class B, Class C and
Class D Shares were +21.44%, +21.15%, +21.19% and +21.35%,
respectively. This compares to the total returns of +22.04% and
+20.37% for the unmanaged Standard & Poor's 500 Index (S&P 500) and
the Lipper Analytical Services' Growth Funds Average, respectively.
(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.)
Merrill Lynch Fundamental Growth Fund, Inc.'s positive performance
during the November quarter was the result of the unusually high
investment returns experienced by many Fund holdings, particularly a
majority of the top ten equity holdings. As a result of its positive
returns, the Fund outperformed the Lipper Growth Funds Average for
the November quarter. At the end of the November quarter, the Fund's
largest industry sector was specialty retailing at 9.4% of net
assets. CVS Corporation, our largest holding in this industry sector
at 2.4% of net assets, appreciated by 36%. The majority of the
companies in the specialty retailing, pharmaceuticals and
telecommunications sectors were significant contributors to the
Fund's positive returns. The percent of quarter-end net assets
invested in the pharmaceuticals and telecommunication industries
were 9.4% and 9.1%, respectively. Major contributors to positive
investment returns among the top ten equity holdings were Intel
Corporation, which appreciated 51% during the November quarter, and
Cisco Systems, Inc., which appreciated 38%. Six of the Fund's top
ten equity holdings had stock price appreciation greater than the
total return of the S&P 500 Index for the quarter. (See page 10 of
this report to shareholders for a list of the Fund's ten largest
holdings and ten largest industries.)
The Environment
During the November quarter, stock prices in markets around the
world hit a low point during the first week of October. Since these
lows, the US stock market has recovered to new record levels for the
S&P 500. The recovery was helped by the broad-based and significant
cuts in central bank interest rates around the world. In addition,
consumer spending in the United States has continued to lead the
real growth of the economy, and is being boosted by record levels of
residential mortgage financing as 30-year US Treasury interest rates
have reached record low levels. In addition, the US Congress passed
a fiscal year 1999 budget that represents the first increase in the
growth rate of spending in nine years. Spending is expected to rise
5.2% in the fiscal year ending September 30, 1999 from an estimated
growth of only 3.2% in fiscal 1998. Consumer confidence has started
to recover from its decline from record levels early in the year,
and spending intentions for the holiday season are relatively high.
Consequently, Merrill Lynch Fundamental Growth Fund, Inc. continues
to have a relatively significant weighting in US retailing
industries.
Many economists and strategists as well as industry security
analysts have been forecasting recession for the US economy starting
as early as the fourth quarter of 1998. The recent retail sales
results and strength in housing and motor vehicle sales seem to
contradict the negative forecasts. From our perspective, there is a
recession in manufacturing employment, which has experienced a
number of consecutive monthly declines recently. However,
manufacturing employment is less than 12% of total US employment,
and growth in service sector employment continues to be relatively
strong. We view the current business and consumer market conditions
as similar to those of the early to mid-1980s when the US dollar was
a strong currency and consumer spending was relatively strong.
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
Because of the sustained strength of the US dollar in recent years
relative to most European currencies as well as the major Asian
currencies, imported products are taking substantial market shares
in paper, chemicals, ferrous and non-ferrous metals, transportation
vehicles, construction equipment and commodity electronic
components. US steel industry trade associations have lobbied
Federal agencies for relief from "unfair pricing" of imported steel
products from Asia and Latin America. The lower prices are likely to
benefit the US consumer over time. Consequently, we look forward to
moderate real economic growth and relatively low inflation in the US
economy in 1999, with consumer spending continuing to be the
strongest growth segment. Although capital spending is likely to
continue to contract in industries faced with import competition
such as chemicals, paper and steel as well as commodity types of
manufactured products and components, we anticipate continued
strength in capital spending in selected technology products.
We expect that the Federal Reserve Open Market Committee will
continue to reduce the Federal Funds rate and inject liquidity into
the banking system. We believe that monetary policymakers will
continue to be concerned about the declines in manufacturing
employment and the declines in manufacturing exports, export orders
and reduced overall capital spending. The US trade balance in goods
is likely to continue to deteriorate as long as consumer spending
remains on a moderate growth track and the manufacturing sector
remains subject to significant price competition in the global
markets. We anticipate a reduction in short-term interest rates as
the Federal Reserve Board continues to try to reverse the recession
in the manufacturing sector of the US economy. We believe that
expansive monetary and fiscal policies will support a moderate level
of real economic growth, a recovery in the rate of growth of overall
corporate profits and higher levels for the US equity markets.
Investment Overview and Strategy
Our investment strategy did not change during the November quarter.
We continued to add to stock holdings in retailing, telecommunications,
pharmaceuticals, banking and financial services and selected
technology companies. From a fundamental analytical basis, we
could not come to a conclusion to raise cash levels by initiating
a sell program during the stock market turbulence in the months
of September and October. In retrospect, this was a factor in
the positive comparative performance of the Fund since the most
recent US stock market low on October 8, 1998.
During the November quarter, we initiated several new positions. We
added CBS Corporation because of its attractive valuation and
prospects for an acceleration in earnings as the company's new
management continues to restructure and attract new management
talent. Because of attractive valuations and our expectations of
continued growth in residential mortgage financing and investment in
new residential structures, we added Federal Home Loan Mortgage
Corp. and Lowe's Companies, Inc. Finally, we added a position in
Tommy Hilfiger Corp., a relatively fast growing and one of the most
successful specialty apparel retailers. In addition, the Fund
received a significant number of companies from its acquisition of
Merrill Lynch Fund for Tomorrow, Inc. Also, Sprint Corporation
distributed shares in Sprint PCS Group, its wireless communication
operation, to Sprint shareholders. We believe that Sprint PCS Group
is an attractive holding.
We eliminated four stock holdings during the November quarter. We
sold Hewlett-Packard Co. because we anticipated a continued
deterioration in rates of return and earnings prospects. Projected
declines in capital investment in manufacturing facilities around
the world are likely to continue to cause declines in the profits of
the very important test and measurement instruments division. Also,
the organization has not been particularly successful in gaining
market share in the personal computer, workstation and server
computer markets, where competition continues to become more intense
from the market share leaders such as COMPAQ Computer Corporation.
We sold PolyGram N.V. in response to the relatively high valuation
as a result of the pending acquisition by The Seagram Company, Ltd.
and the deterioration in the outlook for recorded music sales in
Asia and Latin America. We added but then sold Torchmark Corporation
as a result of prospects of a potential deterioration in
profitability of its life insurance business.
In Conclusion
We continue to have a positive outlook with respect to finding
attractive equity investments in the US market. Our primary focus is
on high-quality, large-capitalization companies with above-average
earnings growth prospects and improving investment returns. Our
viewpoint is that the prospects for continued recessions in the
major economies of Asia and the possibility of recessions in the
United Kingdom and other countries in Europe will result in modest
overall real economic growth in the world and moderate levels of
inflation. Companies that can increase earnings and maintain above-
average rates of return in this environment could be attractive
investments.
We welcome the shareholders of Merrill Lynch Fund for Tomorrow, Inc.
as a result of the acquisition on November 20, 1998 by Merrill Lynch
Fundamental Growth Fund, Inc. We thank you for your participation in
Merrill Lynch Fundamental Growth Fund, Inc., and we look forward to
serving your investment needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Lawrence R. Fuller)
Lawrence R. Fuller
Senior Vice President and
Portfolio Manager
December 30, 1998
PROXY RESULTS
Merrill Lynch Fund for Tomorrow, Inc.'s shareholders voted on and
approved the following proposal at a shareholders' meeting on
November 12, 1998. The description of the proposal and number of
shares voted are as follows:
<TABLE>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
1. To approve the Agreement and Plan of Reorganization
between the Fund and Merrill Lynch Fundamental
Growth Fund, Inc. 8,844,982 390,101 617,003
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
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* +23.63% +21.44% +158.07%
ML Fundamental Growth Fund, Inc. Class B Shares* +22.41 +21.15 +147.46
ML Fundamental Growth Fund, Inc. Class C Shares* +22.36 +21.19 +143.69
ML Fundamental Growth Fund, Inc. Class D Shares* +23.30 +21.35 +155.17
Standard & Poor's 500 Index** +23.66 +22.04 +172.67/+203.14
<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 11/30/98 and Class C & Class D Shares, from 12/24/92 to
11/30/98.
**An unmanaged broad-based Index comprised of common stocks. Since
inception total returns are from 10/21/94 to 11/30/98 and from
12/24/92 to 11/30/98, respectively.
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/98 + 5.20% - 0.32%
Inception (10/21/94)
through 9/30/98 +22.30 +20.64
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/98 + 4.08% + 0.43%
Inception (10/21/94)
through 9/30/98 +21.05 +20.90
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/98 + 4.06% + 3.14%
Five Years Ended 9/30/98 +15.95 +15.95
Inception (12/24/92)
through 9/30/98 +13.65 +13.65
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/98 + 4.90% - 0.60%
Five Years Ended 9/30/98 +16.86 +15.60
Inception (12/24/92)
through 9/30/98 +14.54 +13.47
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Advertising 145,596 Interpublic Group of Companies, Inc. $ 6,405,679 $ 10,009,725 0.6%
Banking & Financial 333,658 Bank One Corporation 15,921,915 17,120,826 0.9
765,000 BankAmerica Corporation 51,082,108 49,868,438 2.7
450,000 Citigroup Inc 25,653,377 22,584,375 1.2
570,000 Mellon Bank Corporation 33,870,502 35,874,375 2.0
410,000 State Street Corporation 22,817,849 28,136,250 1.6
149,345,751 153,584,264 8.4
Beverages 381,000 The Coca-Cola Company 30,048,481 26,693,813 1.5
72,798 The Seagram Company Ltd. 3,053,719 2,497,881 0.1
-------------- -------------- ------
33,102,200 29,191,694 1.6
Broadcasting-- 240,000 CBS Corporation 6,053,534 7,155,000 0.4
Radio & Television 312,660 Chancellor Media Corporation 13,384,727 11,783,374 0.7
515,000 Clear Channel Communications, Inc. 23,315,934 24,076,250 1.3
-------------- -------------- ------
42,754,195 43,014,624 2.4
Chemicals 565,000 duPont (E.I.) de Nemours & Company 37,356,440 33,193,750 1.8
Communications 95,000 Ascend Communications, Inc. 4,371,060 5,331,875 0.3
Equipment 882,500 Cisco Systems, Inc. 44,819,809 66,518,438 3.7
70,000 FORE Systems, Inc. 1,752,804 1,058,750 0.1
30,000 Lucent Technologies, Inc. 2,653,851 2,581,875 0.1
142,660 Newbridge Networks Corporation 5,769,684 4,172,805 0.2
78,865 Northern Telecom Ltd. 3,998,913 3,682,010 0.2
30,300 Telefonaktiebolaget LM Ericsson (ADR)(a) 820,244 835,144 0.0
-------------- -------------- ------
64,186,365 84,180,897 4.6
Computers 1,650,000 COMPAQ Computer Corporation 35,093,766 53,625,000 3.0
220,000 Dell Computer Corporation 9,739,806 13,365,000 0.7
180,000 International Business Machines
Corporation 21,624,750 29,700,000 1.6
60,000 Network Appliance, Inc. 3,296,295 4,507,500 0.3
-------------- -------------- ------
69,754,617 101,197,500 5.6
Cosmetics 100,000 Avon Products, Inc. 1,763,375 4,062,500 0.2
370,016 The Gillette Company 16,261,696 16,997,610 0.9
24,266 International Flavors & Fragrances, Inc. 1,157,165 1,016,139 0.1
-------------- -------------- ------
19,182,236 22,076,249 1.2
Electrical 36,399 Emerson Electric Co. 1,616,259 2,365,935 0.1
Equipment 670,000 General Electric Company 44,290,320 60,635,000 3.3
12,133 Honeywell, Inc. 925,783 969,882 0.1
-------------- -------------- ------
46,832,362 63,970,817 3.5
Electronics 485,000 Intel Corporation 38,842,914 52,167,812 2.8
25,000 Koninklijke (Royal) Philips
Electronics N.V.(NY Registered Shares) 1,201,229 1,582,813 0.1
20,000 STMicroelectronics N.V. (NY Registered
Shares) 1,342,520 1,342,500 0.1
50,000 Texas Instruments Inc. 3,150,385 3,818,750 0.2
-------------- -------------- ------
44,537,048 58,911,875 3.2
Energy 500,000 El Paso Energy Corporation 17,131,800 17,062,500 0.9
30,000 Enron Corp. 1,446,269 1,576,875 0.1
118,900 Thermo Ecotek Corporation 1,276,302 1,248,450 0.1
-------------- -------------- ------
19,854,371 19,887,825 1.1
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Entertainment 150,000 Liberty Media Group (Series A) $ 1,786,112 $ 6,046,875 0.3%
150,000 Viacom, Inc. (Class A) 7,778,458 9,853,125 0.6
800,000 The Walt Disney Company 26,113,862 25,750,000 1.4
-------------- -------------- ------
35,678,432 41,650,000 2.3
Financial Services 67,283 American Express Company 6,728,783 6,732,505 0.4
180,000 Federal National Mortgage Association 10,483,493 13,095,000 0.7
181,995 Franklin Resources, Inc. 9,685,981 7,780,286 0.4
125,000 Federal Home Loan Mortgage Corp. 7,329,139 7,562,500 0.4
200,000 Household International, Inc. 4,517,232 7,825,000 0.4
218,394 Morgan Stanley, Dean Witter,
Discover & Co. 14,669,924 15,232,981 0.9
11,380 Waddell & Reed Financial, Inc. (Class A) 109,783 271,697 0.0
48,980 Waddell & Reed Financial, Inc. (Class B) 471,098 1,144,907 0.1
-------------- -------------- ------
53,995,433 59,644,876 3.3
Food Merchandising 48,000 Albertson's, Inc. 1,895,172 2,739,000 0.1
100,000 Meyer (Fred), Inc. 2,405,021 5,087,500 0.3
125,000 Safeway, Inc. 6,042,742 6,601,562 0.4
-------------- -------------- ------
10,342,935 14,428,062 0.8
Foods 75,000 ConAgra, Inc. 1,834,821 2,357,813 0.1
60,665 Wrigley (Wm.) Jr. Company 4,533,973 5,346,103 0.3
-------------- -------------- ------
6,368,794 7,703,916 0.4
Healthcare 7,888 Coram Health Corp. (Warrants)(b) 0 0 0.0
Home Furnishings 355,000 Ethan Allen Interiors, Inc. 18,274,523 14,022,500 0.8
100,000 Shaw Industries, Inc. 1,512,010 2,025,000 0.1
-------------- -------------- ------
19,786,533 16,047,500 0.9
Hotels 145,596 Marriott International, Inc. (Class A) 4,604,376 4,276,882 0.2
Household Products 60,000 Colgate-Palmolive Company 4,738,398 5,137,500 0.3
97,064 Kimberly-Clark Corporation 4,857,102 5,107,993 0.3
495,000 The Procter & Gamble Company 38,161,549 43,374,375 2.4
465,000 Unilever N.V. (NY Registered Shares) 33,048,690 35,950,312 1.9
-------------- -------------- ------
80,805,739 89,570,180 4.9
Information 200,000 America Online, Inc. 9,484,883 17,512,500 1.0
Processing 50,000 Ceridian Corporation 1,959,250 3,253,125 0.2
100,000 Computer Sciences Corporation 3,878,500 5,712,500 0.3
436,788 First Data Corporation 15,634,701 11,656,780 0.6
-------------- -------------- ------
30,957,334 38,134,905 2.1
Insurance 100,000 Aetna, Inc. 7,314,793 7,731,250 0.4
288,999 American International Group, Inc. 22,766,088 27,165,906 1.5
-------------- -------------- ------
30,080,881 34,897,156 1.9
Medical Technology 10,000 Boston Scientific Corporation 758,210 495,000 0.0
20,000 Guidant Corporation 1,502,734 1,716,250 0.1
24,266 Johnson & Johnson 1,280,674 1,971,612 0.1
-------------- -------------- ------
3,541,618 4,182,862 0.2
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
Industries Held Stocks Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Oil Services 70,000 Baker Hughes, Inc. $ 2,439,891 $ 1,281,875 0.1%
36,000 Diamond Offshore Drilling, Inc. 1,584,456 805,500 0.0
30,000 Schlumberger Ltd. 2,064,088 1,340,625 0.1
-------------- -------------- ------
6,088,435 3,428,000 0.2
Pharmaceuticals 36,399 Amgen, Inc. 2,051,765 2,734,475 0.1
455,000 Bristol-Myers Squibb Co. 39,454,830 55,765,938 3.1
100,000 Lilly (Eli) and Company 2,286,050 8,968,750 0.5
50,000 Novartis AG (ADR)(a) 1,942,187 4,706,250 0.2
300,900 Merck & Co., Inc. 33,129,790 46,601,887 2.6
460,000 Pfizer Inc. 41,476,255 51,347,500 2.8
-------------- -------------- ------
120,340,877 170,124,800 9.3
Photography 13,000 Eastman Kodak Company 906,493 943,313 0.1
Pollution Control 100,000 Waste Management, Inc. 4,607,530 4,287,500 0.2
Publishing 165,450 Gannett Co., Inc. 11,654,521 10,681,866 0.6
Restaurants 100,000 McDonald's Corporation 6,091,574 7,006,250 0.4
Retail--Specialty 250,000 Abercrombie & Fitch Co. (Class A) 11,855,954 14,000,000 0.8
875,000 CVS Corporation 34,079,049 43,203,125 2.4
405,000 The Gap, Inc. 21,258,794 29,792,812 1.6
180,000 Lowe's Companies, Inc. 6,413,070 7,605,000 0.4
1,024,747 Staples, Inc. 23,300,681 35,738,052 2.0
75,000 Tommy Hilfiger Corp. 4,051,103 4,537,500 0.2
700,000 Walgreen Co. 27,298,581 37,581,250 2.1
-------------- -------------- ------
128,257,232 172,457,739 9.5
Retail--Stores 380,860 Federated Department Stores, Inc. 18,442,642 15,877,101 0.9
956,950 Wal-Mart Stores, Inc. 47,591,026 72,070,297 3.9
-------------- -------------- ------
66,033,668 87,947,398 4.8
Semiconductors 200,000 Applied Materials, Inc. 6,971,186 7,750,000 0.4
Software-- 75,000 Baan Company N.V. (NY Registered Shares) 3,198,679 890,625 0.0
Computer 580,000 Microsoft Corporation 55,350,698 70,760,000 3.9
700,000 PeopleSoft, Inc. 28,963,852 14,393,750 0.8
1,100,000 SAP AG (Systeme, Anwendungen,
Produkte in der
Datenverarbeitung)(ADR)(a) 36,651,323 46,543,750 2.6
-------------- -------------- ------
124,164,552 132,588,125 7.3
Telecommunications 388,256 AT&T Corp. 25,007,570 24,193,202 1.4
154,420 Cable & Wireless PLC 6,210,420 5,829,355 0.3
932,000 GTE Corporation 53,114,481 57,784,000 3.2
560,000 MCI WorldCom, Inc. 27,899,246 33,005,000 1.8
20,000 Nokia OYJ (ADR)(a) 377,850 1,960,000 0.1
500,000 Sprint Corporation 29,399,058 36,375,000 2.0
370,000 Sprint PCS Group 5,869,164 5,920,000 0.3
-------------- -------------- ------
147,877,789 165,066,557 9.1
Toys 303,325 Mattel, Inc. 11,546,515 10,483,670 0.6
Travel & Lodging 525,000 Carnival Corporation (Class A) 15,740,783 18,112,500 1.0
Total Stocks 1,459,754,494 1,720,633,277 94.5
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
Amount Short-Term Securities Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Commercial $13,000,000 Concord Minutemen Capital Co. LLC,
Paper* 5.36% due 1/04/1999 $ 12,934,191 $ 12,934,191 0.7%
10,000,000 Concord Minutemen Capital Co. LLC,
5.45% due 1/15/1999 9,931,875 9,931,875 0.5
10,000,000 Eureka Securitization, Inc., 5.17%
due 12/22/1998 9,969,842 9,969,842 0.6
4,076,000 General Motors Acceptance Corp.,
5.50% due 12/01/1998 4,076,000 4,076,000 0.2
10,000,000 Lexington Parker Capital Company, LLC,
5.55% due 1/05/1999 9,946,042 9,946,042 0.5
7,000,000 Riverwoods Funding Corp, 5.45% due
1/08/1999 6,959,730 6,959,731 0.4
5,000,000 Toys R Us, Inc., 5.18% due 12/09/1998 4,994,244 4,994,244 0.3
25,000,000 Variable Funding Capital Corp.,
5.41% due 1/06/1999 24,864,750 24,864,750 1.4
-------------- -------------- ------
83,676,674 83,676,675 4.6
US Government 16,000,000 Federal Home Loan Bank, 4.79% due
Agency Obligations* 12/16/1998 15,968,067 15,968,067 0.8
Total Short-Term Securities 99,644,741 99,644,742 5.4
Total Investments $1,559,399,235 1,820,278,019 99.9
==============
Other Assets Less Liabilities 1,033,913 0.1
-------------- ------
Net Assets $1,821,311,932 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $264,447,651 and
13,967,196 shares outstanding $ 18.93
==============
Class B--Based on net assets of $927,750,325 and
51,524,575 shares outstanding $ 18.01
==============
Class C--Based on net assets of $173,375,222 and
9,568,578 shares outstanding $ 18.12
==============
Class D--Based on net assets of $455,738,734 and
24,265,801 shares outstanding $ 18.78
==============
<FN>
*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.
(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.
</TABLE>
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
PORTFOLIO INFORMATION
As of November 30, 1998
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
Wal-Mart Stores, Inc. 3.9%
Microsoft Corporation 3.9
Cisco Systems, Inc. 3.7
General Electric Company 3.3
GTE Corporation 3.2
Bristol-Myers Squibb Co. 3.1
COMPAQ Computer Corporation 3.0
Intel Corporation 2.8
Pfizer Inc. 2.8
BankAmerica Corporation 2.7
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Retail--Specialty 9.5%
Pharmaceuticals 9.3
Telecommunications 9.1
Banking & Financial 8.4
Software-Computer 7.3
Computers 5.6
Household Products 4.9
Retail--Stores 4.8
Communications Equipment 4.6
Electrical Equipment 3.5
Equity Portfolio Changes for the
Quarter Ended November 30, 1998
Additions
Avon Products, Inc.
CBS Corporation
Ceridian Corporation
Computer Sciences Corporation
Lilly (Eli) and Company
Federal Home Loan Mortgage Corp.
Household International, Inc.
International Business Machines Corporation
Koninklijke (Royal) Philips Electronics N.V.
(NY Registered Shares)
Liberty Media Group (Series A)
Lowe's Companies, Inc.
Nokia OYJ (ADR)
Novartis AG (ADR)
Shaw Industries, Inc.
Sprint PCS Group
Thermo Ecotek Corporation
Tommy Hilfiger Corp.
*Torchmark Corporation
Waddell & Reed Financial, Inc. (Class A)
Waddell & Reed Financial, Inc. (Class B)
Deletions
Hewlett-Packard Co.
NationsBank Corporation
PolyGram N.V. (NY Registered Shares)
*Torchmark Corporation
[FN]
*Added and deleted in the same quarter.
Merrill Lynch Fundamental Growth Fund, Inc.
November 30, 1998
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Lawrence R. Fuller, Senior Vice President and
Portfolio Manager
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, 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
