<PAGE>
 
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended   September 30, 1997
                               --------------------

                    OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number 0-16110

                       THE GROWTH AND GUARANTEE FUND L.P.
                       ----------------------------------
                         (Exact Name of Registrant as
                           specified in its charter)

          Delaware                                          13-3407269
----------------------------                 -----------------------------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

                   c/o Merrill Lynch Investment Partners Inc.
            Merrill Lynch World Headquarters - South Tower, 6th Fl.
             World Financial Center New York, New York  10080-6106
             -----------------------------------------------------
                    (Address of principal executive offices)
                                  (Zip Code)

                                 212-236-5662
                        ------------------------------
             (Registrant's telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X    No
                                              -----    -----     

                        This document contains 9 pages.
<PAGE>
 
                        PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

                      THE GROWTH AND GUARANTEE FUND L.P.
                      ----------------------------------
                       (a Delaware limited partnership)
                       --------------------------------
                                        
                CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                ----------------------------------------------


<TABLE>
<CAPTION>
                                                                       September 30,          December 31,
                                                                            1997                  1996
                                                                    ------------------    ------------------
 
ASSETS
------
<S>                                                                   <C>                   <C>
Accrued interest                                                           $     8,548            $    8,352
Equity in commodity futures trading accounts:
    U.S. Government obligations                                              8,843,349             7,628,080
    Cash and options premium                                                 2,101,581             2,042,087
    Net unrealized profit (loss) on open contracts                              95,850              (136,425)
                                                                    ------------------    ------------------
 
                TOTAL                                                      $11,049,328            $9,542,094
                                                                    ==================    ==================
 
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
    Redemptions payable                                                    $    26,599            $   48,061
    Administrative fees and brokerage
        commissions payable                                                     16,619                14,718
                                                                    ------------------    ------------------
 
            Total liabilities                                                   43,218                62,779
                                                                    ------------------    ------------------
 
Minority Interest                                                              141,324                57,792
                                                                    ------------------    ------------------
 
PARTNERS' CAPITAL:
  General Partners (680 and 680 Units)                                         180,876               148,552
  Limited Partners (40166 and 42447 Units)                                  10,683,910             9,272,971
                                                                    ------------------    ------------------
 
            Total partners' capital                                         10,864,786             9,421,523
                                                                    ------------------    ------------------
 
                TOTAL                                                      $11,049,328            $9,542,094
                                                                    ==================    ==================
 
NET ASSET VALUE PER UNIT
 
         (Based on 40846 and 43127 Units outstanding)                          $265.99               $218.46
                                                                    ==================    ==================
 
See notes to consolidated financial statements.
</TABLE>

                                       2
<PAGE>
 
                      THE GROWTH AND GUARANTEE FUND L.P.
                      ----------------------------------
                       (a Delaware limited partnership)
                       --------------------------------
                                        
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     -------------------------------------
                                        
<TABLE>
<CAPTION>
                                       For the three         For the three          For the nine          For the nine
                                        months ended          months ended          months ended          months ended
                                       September 30,         September 30,         September 30,         September 30,
                                            1997                  1996                  1997                  1996
                                    -----------------     -----------------     -----------------     -----------------
<S>                                   <C>                   <C>                   <C>                   <C>
REVENUES:
    Trading (loss) profit:
      Realized:
          Options and Futures                $480,500             $(123,150)           $1,526,850              $258,925
           U.S. Government                     
            obligations                            40                  (947)                4,897                55,397
     Change in unrealized:
          Options and Futures                 (25,875)              208,800               232,275               363,000
           U.S. Government                    
            obligations                        26,918                25,162                 6,591               (90,198)
                                    -----------------     -----------------     -----------------     -----------------
 
            Total trading results             481,583               109,865             1,770,613               587,124
                                    -----------------     -----------------     -----------------     -----------------
 
     Interest income:
       Options and Futures                     26,991                16,358                74,489                50,056
       U.S. Government obligations            128,277                90,121               358,537               271,854
                                    -----------------     -----------------     -----------------     -----------------
 
            Total revenues                    636,851               216,344             2,203,639               909,034
                                    -----------------     -----------------     -----------------     -----------------
 
EXPENSES:
    Brokerage commissions                         712                 1,025                 3,425                 2,262
    Administrative fees                        47,480                38,548               133,591               116,688
                                    -----------------     -----------------     -----------------     -----------------
 
            Total expenses                     48,192                39,573               137,016               118,950
                                    -----------------     -----------------     -----------------     -----------------
 
NET INCOME BEFORE
    MINORITY INTEREST                         588,659               176,771             2,066,623               790,084
    Minority interest on income               (30,238)               (2,580)              (83,532)              (13,403)
                                    -----------------     -----------------     -----------------     -----------------
 
NET INCOME                                   $558,421             $ 174,191            $1,983,091              $776,681
                                    =================     =================     =================     =================
 
 
NET INCOME PER UNIT:
    Weighted average number of units
        outstanding                            41,063                44,819                41,539                45,397
                                    =================     =================     =================     =================
 
    Weighted average net income
       per Limited Partner
      and General Partner Unit                 $13.60                 $3.89                $47.74                $17.11
                                    =================     =================     =================     =================
 
See notes to consolidated financial statements.
</TABLE>

                                       3
<PAGE>
 
                       THE GROWTH AND GUARANTEE FUND L.P.
                      -----------------------------------
                        (a Delaware limited partnership)
                        --------------------------------
                                        
                                        
            CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
            -------------------------------------------------------
             For the nine months ended September 30, 1997 and 1996
             -----------------------------------------------------

                                        
<TABLE>
<CAPTION>
                                             Units             Limited Partners        General Partner             Total
                                      -----------------      ------------------      ------------------     -----------------
<S>                                     <C>                    <C>                     <C>                    <C>
PARTNERS' CAPITAL,
  December 31, 1995                              46,219             $ 8,496,236                $126,846           $ 8,623,082
 
Net income                                            -                 764,998                  11,683               776,681
 
Redemptions                                      (2,291)               (449,323)                      -              (449,323)
                                      -----------------      ------------------      ------------------     -----------------
 
PARTNERS' CAPITAL,
  September 30, 1996                             43,928             $ 8,811,911                $138,529           $ 8,950,440
                                      =================      ==================      ==================     =================
 
PARTNERS' CAPITAL,
  December 31, 1996                              43,127             $ 9,272,971                $148,552           $ 9,421,523
 
Net income                                            -               1,950,768                  32,324             1,983,092
 
Redemptions                                      (2,281)               (539,829)                      -              (539,829)
                                      -----------------      ------------------      ------------------     -----------------
 
PARTNERS' CAPITAL,
  September 30, 1997                             40,846             $10,683,910                $180,876           $10,864,786
                                      =================      ==================      ==================     =================
 
 
See notes to consolidated financial statements.
</TABLE>

                                       4
<PAGE>
 
                       THE GROWTH AND GUARANTEE FUND L.P.
                       ----------------------------------
                        (a Delaware limited partnership)
                        --------------------------------
                                        
                                        
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                        

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   These financial statements have been prepared without audit.  In the opinion
   of management, the financial statements contain all adjustments (consisting
   of only normal recurring adjustments) necessary to present fairly the
   financial position of  The Growth and Guarantee Fund L.P. (the "Partnership"
   or the "Fund") as of September 30, 1997 and the results of its operations for
   the nine months ended September 30, 1997 and 1996.  However, the operating
   results for the interim periods may not be indicative of the results expected
   for the full year.

   Certain information and footnote disclosures normally included in annual
   financial statements prepared in accordance with general accepted accounting
   principles have been omitted.  It is suggested that these consolidated
   financial statements be read in conjunction with the consolidated financial
   statements and notes thereto  included in the Partnership's Annual Report on
   Form 10-K filed with the Securities and Exchange Commission for the year
   ended December 31, 1996 (the "Annual Report").

2. FAIR VALUE AND OFF-BALANCE SHEET RISK

The Partnership's revenues by reporting category for the respective periods were
as follows:


<TABLE>
<CAPTION>
                    For the three          For the three           For the nine            For the nine
                    months ended            months ended           months ended            months ended
                    September 30,          September 30,           September 30,          September 30,
                        1997                    1996                   1997                    1996
                -------------------    --------------------    -------------------    -------------------
<S>               <C>                    <C>                     <C>                    <C>
Interest rate              $ 27,671                $ 25,040             $   15,088               $(32,939)
Stock indices               453,912                  84,825              1,755,525                620,063
                -------------------    --------------------    -------------------    -------------------
                           $481,583                $109,865             $1,770,613               $587,124
                ===================    ====================    ===================    ===================
</TABLE>




The contract/notional values of the Partnership's open derivative instrument
positions as of September 30, 1997 and December 31, 1996 were as follows:

<TABLE>
<CAPTION>
                                     1997                                              1996
                 -------------------------------------------     ---------------------------------------------
                     Commitment to          Commitment to              Commitment to          Commitment to
                  Purchase (Futures,       Sell (Futures,           Purchase (Futures,       Sell (Futures,
                  Options & Forwards)    Options & Forwards)        Options & Forwards)    Options & Forwards)
                 ---------------------  ---------------------      ---------------------  ---------------------
<S>                 <C>                      <C>                         <C>                      <C>
Stock  Indices           $10,548,250                        -                  $8,976,550                        -
                  ==================       ==================          ==================       ==================
</TABLE>

The contract/notional value of exchange traded open contracts as of September
30, 1997 and December 31, 1996 were as follows (the Partnership does not trade
non-exchange-traded derivative instruments):

<TABLE>
<CAPTION>
                                     1997                                             1996
                  ------------------------------------------     ---------------------------------------------
                     Commitment to          Commitment to              Commitment to          Commitment to
                  Purchase (Futures,       Sell (Futures,           Purchase (Futures,       Sell (Futures,
                  Options & Forwards)    Options & Forwards)        Options & Forwards)    Options & Forwards)
                 ---------------------  ---------------------      ---------------------  ---------------------
<S>                 <C>                      <C>                         <C>                      <C>
Exchange
   traded                $10,548,250                        -                  $8,976,550                        -
                  ==================       ==================          ==================       ==================
</TABLE>

                                       5
<PAGE>
 
The average fair value of the derivative instruments held or issued as of the
end of each calendar month during the nine months ended September 30, 1997 and
the year ended December 31, 1996 were as follows:

<TABLE>
<CAPTION>
                                     1997                                              1996
                 -------------------------------------------     ---------------------------------------------
                     Commitment to          Commitment to              Commitment to          Commitment to
                  Purchase (Futures,       Sell (Futures,           Purchase (Futures,       Sell (Futures,
                  Options & Forwards)    Options & Forwards)        Options & Forwards)    Options & Forwards)
                 ---------------------  ---------------------      ---------------------  ---------------------
<S>                 <C>                      <C>                         <C>                      <C>
Stock  Indices            $9,334,414                        -                  $7,367,783                        -
                  ==================       ==================          ==================       ==================
</TABLE>


At September 30, 1997 and December 31, 1996, $11,037,357 and $ 9,525,064 of
these assets, respectively, were held in segregated accounts.

The gross unrealized profit and the net unrealized profit (loss) on open
contracts as of September 30, 1997 and December 31, 1996 were as follows:

<TABLE>
<CAPTION>
                                    1997                                           1996
                -----------------------------------------      -----------------------------------------
                       Gross                    Net                   Gross                    Net
                     Unrealized             Unrealized              Unrealized             Unrealized
                       Profit              Profit (Loss)              Profit              Profit (Loss)
                ------------------     ------------------      ------------------     ------------------
<S>                 <C>                      <C>                      <C>                      <C>
Exchange
   traded                 $133,700                $95,850                       -              $(136,425)
                ==================     ==================      ==================      =================
</TABLE>

3. RELATED PARTY TRANSACTIONS

        Merrill Lynch Investment Partners Inc. ("MLIP") is currently reviewing
certain aspects of the interest arrangements between the Partnership and certain
affiliates of MLIP. The purpose of the review is to confirm that the Partnership
received interest credits as described in its Prospectus. The results of this
review have not been determined.

Item 2:  Management's Discussion and Analysis of Financial
         -------------------------------------------------
         Condition and Results of Operations
         -----------------------------------

Operational Overview: Advisor Selections
----------------------------------------

    Due to the nature of the Fund's business, its results of operations depend
on the Trading Advisor's ability to optimize the extent to which the Fund
participates in the significant upward movement in stock index levels.  The
Trading Advisor's Dynamic Asset Allocation Risk Management Strategies are
confidential, so that substantially the only information that can be furnished
regarding the Fund's results of operations is contained in the performance
record of its trading.  Unlike operating businesses, general economic or
seasonal conditions do not directly affect the profit potential of the Fund, and
its past performance is not necessarily indicative of future results.  Because
of the speculative nature of its trading, operational or economic trends have
little relevance to the Fund's results.  However, the Fund is dependent upon
significant upward movement in stock index levels for profitability.

Results of Operations - General
-------------------------------

    The Fund is materially different from most other futures funds in that it
does not attempt to achieve speculative profits from taking long or short
positions in a variety of markets.  Rather, the Fund's objective is to capture a
substantial portion of significant upside movements in the S&P 500 Stock Index
(dividends not reinvested) while providing the protection of a maximum loss
which can be incurred during any 18 month Time Horizon.  The Fund's ability to
capture upside S&P 500 Stock Index movements is based on a call options
strategy, and is path dependent - i.e., the extent to which the Fund is able to
capture upside movements in the S&P 500 depends on the patterns in which such
movements occur.  For example, if the S&P 500 increased during a Time Horizon by
a total of 25%, but did so after incurring a 15% drop, it is likely that the
Fund would recognize little or none of the upward movement, because it would
have lost all that it had available to lose during the Time Horizon in question
during the course of the 15% drop.

    During the past 3 months of trading ending September 30, 1997, the S&P 500
Stock Index (dividends not reinvested) increased a total of 7.04%, whereas the
Net Asset Value per Series A unit increased 5.37%.

Time Horizon
------------

    On June 13, 1997, the NAV of the Fund increased to $255.45, a level
triggering a "New Profits Lock-in."  Based upon the $255.45 per Unit NAV as of
the beginning of the current Time Horizon, which ends at the close of business
on November 30, 1998, the New Protected Minimum NAV is 

                                       6
<PAGE>
 
$229.90 per Unit. The Fund will experience a "New Profits Lock-In" if the NAV
reaches $280.99 per Unit.


Performance Summary
-------------------

    During the first nine months of 1996, the Fund's average month-end Net
Assets equaled $8,809,408, and the Fund recognized gross trading gains of
$587,124 or 6.66% of such average month-end Net Assets.  Brokerage commissions
of $2,262 or .03% and Administrative fees of $116,688 or 1.32% of average month-
end Net Assets were paid.  Interest income of $321,910 or 3.65% of average
month-end Net Assets resulted in net gain of  $776,681 (after deduction of
MLIP's "Minority Interest" of $13,403 in the Trading Partnership) or 8.82% of
average month-end Net Assets which resulted in a 9.21% increase in the Net Asset
Value per Unit since December 31, 1995.

    During the first nine months of 1997, the Fund's average month-end Net
Assets equaled $10,023,394  and the Fund recognized gross trading gains of
$1,770,613 or 17.66% of such average month-end Net Assets.  Brokerage
commissions of $3,425 or 0.03% and Administrative fees of $133,591 or 1.33% of
average month-end Net Assets were paid.  Interest income of $433,026 or 4.32% of
average month-end Net Assets resulted in net gain of $1,983,091(after deduction
of MLIP's "Minority Interest" of $83,532 in the Trading Partnership) or 19.78%
of average month-end Net Assets which resulted in a 21.76% increase in the Net
Asset Value per Unit since December 31, 1996.

         During the first nine months of 1997 and 1996, the Fund experienced 14
profitable months and 4 unprofitable months.

<TABLE>
<CAPTION>
                                  MONTH-END NET ASSET VALUE PER UNIT
 
        Jan.       Feb.       Mar.        Apr        May        Jun        Jul        Aug        Sep
-------------------------------------------------------------------------------------------------------
<S>  <C>         <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
1996    $192.60    $192.04    $193.82    $194.68    $198.40    $199.74    $191.34    $193.92    $203.75
-------------------------------------------------------------------------------------------------------
1997    $230.41    $231.23    $221.77    $231.83    $244.06    $252.44    $269.18    $256.52    $265.99
-------------------------------------------------------------------------------------------------------
</TABLE>

Importance of Market Factors
----------------------------


    Comparisons between the Fund's performance in one fiscal year to the prior
year are unlikely to be meaningful, given the uncertainty of price movements in
the markets traded by the Fund.

Liquidity
---------

    A significant portion of the Partnership's assets were held in U.S. Treasury
STRIPS which, in turn, generate the protected minimum Net Asset Value.  The U.S.
STRIPS are highly liquid but are acquired by the Fund on a buy-and-hold basis
for the course of a Time Horizon, except to the extent liquidated to fund a
portion of redemptions.  A portion of the Partnership's assets are also held as
cash which, in turn, is used to margin its stock index futures positions and is
withdrawn, as necessary, to pay a portion of redemptions, trading losses and
fees.

    The stock index futures contracts in which the Partnership trades may become
illiquid under certain market conditions.  Stock Index futures contracts in the
U.S. are subject to "circuit breakers" which require the suspension of trading
after certain market movements.  However, these "circuit breakers" have rarely
been "triggered," and because the Fund buys rather than sells options, it is
generally not exposed to risk of not being able to close out positions against
which the market is moving as a result of illiquidity.

Capital Resources
-----------------

    The Partnership does not have, nor does it expect to have, any capital
assets and has no material commitments for capital expenditures.  The
Partnership uses its assets to (i) assure the investors the protected minimum
Net Asset Values as of the end of the Time Horizons and (ii) supply the
necessary margin or premiums for, and to pay any losses incurred in connection
with, its trading activity and to pay redemptions and fees.  Inflation is not a
significant factor in the Fund's profitability, although inflationary cycles can
give rise to the stock index futures markets in which the Funds trades
exclusively.  The Fund cannot be profitable during a Time Horizon unless the S&P
500 Stock Index market rises.


                                       7
<PAGE>
 
                                 PART II - OTHER INFORMATION


Item 1. Legal Proceedings
 
        There are no pending proceedings to which the Partnership or the General
Partner is a party.


Item 2. Changes in Securities

        None.


Item 3. Defaults Upon Senior Securities

        None.


Item 4. Submission of Matters to a Vote of Security Holders

        None.


Item 5. Other Information

        None.


Item 6. Exhibits and Reports on Form 8-K.

        (a)  Exhibits

        There are no exhibits required to be filed as part of this document.

        (b)  Reports on Form 8-K

        There were no reports on Form 8-K filed during the first nine months of
        fiscal 1997.

                                       8
<PAGE>
 
                                 SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                        THE GROWTH AND GUARANTEE FUND L.P.
                        ----------------------------------
                                        



                            By:  MERRILL LYNCH INVESTMENT PARTNERS INC.
                                    (General Partner)



Date: November 14, 1997     By /s/JOHN R. FRAWLEY, JR.
                               -----------------------
                              John R. Frawley, Jr.
                              President, Chief Executive Officer
                              and Director



Date:  November 14, 1997    By /s/MICHAEL A. KARMELIN
                               ----------------------
                              Michael A. Karmelin
                              Chief Financial Officer, Vice President
                              and Treasurer