SEMI-ANNUAL REPORT
JULY 31, 2000
Mercury Growth
Opportunity Fund
Mercury
U.S. Government
Securities Fund
OF THE ASSET PROGRAM, INC.
MERCURY GROWTH OPPORTUNITY FUND
GEOGRAPHIC ALLOCATION
As a Percentage of Net Assets as of July 31, 2000
A pie chart illustrating the following percentages:
Japan 1.1%
Sweden 1.7%
United Kingdom 3.5%
Canada 4.9%
France 3.0%
Netherlands 2.0%
China 0.3%
United States 81.8%
INVESTMENTS AS OF JULY 31, 2000
Percent of
Ten Largest Holdings Net Assets
EMC Corporation 5.1%
Cisco Systems, Inc. 5.0
Nortel Networks Corporation 4.9
General Electric Company 4.9
Sun Microsystems, Inc. 4.1
JDS Uniphase Corporation 3.6
STMicroelectronics NV 3.0
America Online, Inc. 2.8
Enron Corp. 2.8
Pfizer Inc. 2.8
Percent of
Ten Largest Industries Net Assets
Communications Equipment 17.1%
Energy 9.3
Computers 9.2
Information Processing 7.2
Electronics 6.9
Software--Computer 5.8
Electrical Equipment 4.9
Wireline Communication 4.4
Pharmaceuticals 4.0
Oil Services 3.9
Mercury Growth Opportunity Fund
July 31, 2000 2 Mercury U.S. Government Securities Fund
DEAR SHAREHOLDER
On April 3, 2000, Merrill Lynch Asset Builder Program, Inc. was
rebranded and is now distributed as The Asset Program, Inc. In
addition, the Growth Opportunity Portfolio changed its name to
Mercury Growth Opportunity Fund and U.S. Government Securities
Portfolio changed its name to Mercury U.S. Government Securities
Fund. These changes do not imply a change in each Fund's investment
objective, which remains the same. Mercury Growth Opportunity Fund
seeks long-term capital growth by investing primarily in equity
securities of growth companies. Mercury U.S. Government Securities
Fund seeks a high current return through investments in securities
issued or guaranteed by the US Government, Government agencies or
Government-sponsored enterprises, including GNMA mortgage-backed
certificates and other mortgage-backed securities. Both Funds' Class
A, Class B, Class C and Class D Shares have been redesignated Class
I, Class B, Class C and Class A Shares, respectively.
Mercury Growth Opportunity Fund
For the six months ended July 31, 2000, Mercury Growth Opportunity
Fund's Class I, Class A, Class B and Class C Shares had total
returns of +5.31%, +5.15%, +4.76% and +4.73%, respectively. For the
same period, the total return of the Lipper Analytical Services,
Inc. Growth Funds Average was +5.26%, and the total return for the
unmanaged Standard & Poor's 500 (S&P 500) Index was +3.20%.
(Investment results shown do not reflect sales charges and would be
lower if sales charges were included. Complete performance
information can be found on pages 7 and 8 of this report to
shareholders.)
At July 31, 2000, the two largest industry areas in the Fund were
communications equipment and energy. Among the top ten equity
holdings in the Fund were Nortel Networks Corporation, Cisco
Systems, Inc. and JDS Uniphase Corporation, which are among the
leading companies in the communications equipment and systems
industry. We believe that the relatively high rates of growth of
capital investment in Internet infrastructure by public and private
communication service companies may continue for several years. In
the energy industry, we believe that deregulation of markets and
corporate consolidations present opportunities for major, well-
managed organizations to improve rates of return over the next
several years. The major equity investments in the Fund included
Enron Corp., which is also marketing unregulated communication
bandwidth as well as energy products on a global basis, Exxon Mobil
Corporation, BP Amoco PLC and Royal Dutch Petroleum Company.
Major stock market declines occurred in the months of April and May
2000, with the most significant stock price declines generally
taking place in the common shares of technology and communication
service companies. This had a significant negative effect on the
absolute and relative returns of the Fund's shares.
Mercury Growth Opportunity Fund
July 31, 2000 3 Mercury U.S. Government Securities Fund
In our opinion, there continues to be more evidence of a slowdown in
the real rate of growth of US consumer spending on motor vehicles,
residential housing and related furniture and appliances. The
substantial reduction in the real growth of consumer spending in the
second calendar quarter report for the US economy may temper the
desire of the US Federal Reserve Board to continue tightening
monetary policy. The rate of growth of US corporate profits in the
second calendar quarter looks like it was better than a 20% rate of
growth over a year ago. It appears from statements by senior
managements of many companies about increasing business backlogs
that the high rates of growth of corporate profits for many of the
communications equipment companies, which are focused on Internet
infrastructure, could continue. Consequently, we currently intend to
continue with an investment weighting greater than the S&P 500 Index
in technology with a focus on the communication equipment and
components companies.
Mercury U.S. Government Securities Fund
During the six-month period ended July 31, 2000, the Federal Reserve
Board elected to tighten monetary policy three times. This was done
in an effort to slow the economy and reduce the threat of inflation
and brought the Federal Funds rate 75 basis points (0.75%) higher to
6.5%. Although the Federal Funds rate ended the period 75 basis
points higher, all other Treasury benchmark yields ended the period
lower, posting positive price returns for the July period. The two-
year US Treasury yield ended the period 30 basis points lower, while
five-year, ten-year and 30-year Treasury yields ended 54 basis
points, 63 basis points and 71 basis points lower, respectively,
completely inverting the US Treasury note yield curve.
The volatility experienced during the period combined with the
continued inversion of the Treasury yield curve caused mortgage-
backed securities (MBS) to underperform their Treasury benchmarks
for the period. This can be seen in a very broad sense by the
unmanaged Salomon Smith Barney Total Rate of Return Indexes. (All
returns cited are measured by the unmanaged Salomon Smith Barney
Total Rate of Return Index.) The Treasury component of the Index
returned +6.17% for the six-month period, outperforming all other
asset classes in the Broad Investment-Grade Bond (BIG) Index. While
the mortgage component outperformed all other components in the BIG
Index, its +5.27% return underperformed the Salomon Smith Barney
Treasury Index. This was largely in response to the performance of
the long-term bond, which returned +11.47% for the six-month period,
by far outperforming any other Treasury benchmark. During the
Mercury Growth Opportunity Fund
July 31, 2000 4 Mercury U.S. Government Securities Fund
period, the Fund benefited by being heavily weighted in Government
National Mortgage Association (GNMA) MBS, which outperformed their
conventional counterparts (Federal Home Loan Mortgage Corporation
(FHLMC), Federal National Mortgage Association (Fannie Mae) MBS).
The Fund's two largest 30-year MBS positions, GNMA 7% and 7.5%,
returned +5.77% and +5.47%, respectively, as compared to Fannie Mae
7% and 7.5%, which returned +5.16% and +4.96%, respectively. The
Fund also held a heavy 15-year MBS allocation. We believed 15-year
MBS would provide a better level of protection for the portfolio
from extension risk if interest rates continued to rise. Although
interest rates fell during the period, the 15-year MBS held in the
portfolio had discounted prices and thus were able to participate
fully in the rally. The Fund's largest 15-year MBS position, FHLMC
Gold 5.5%, returned +5.23% for the period, very similar to the five-
year Treasury note, which returned +5.27% and has a similar average
life. For the six months ended July 31, 2000, the Fund's Class I,
Class A, Class B and Class C Shares had total returns of +4.94%,
+4.81%, +4.56% and +4.53%, respectively. (Investment results shown
do not reflect sales charges and would be lower if sales charges
were included. Complete performance information can be found on
pages 9 and 10 of this report to shareholders.)
We conducted several trades during the period. In an effort to cover
redemptions experienced early in the period, we reduced our short-
term Treasury note allocation. We used the Fund's short-term US
Treasury note position to stabilize the duration of the portfolio in
a rising interest rate environment such as the one we experienced in
the previous period. Because we had a heavy 15-year MBS position, we
were comfortable reducing our US Treasury note position. We also
took advantage of opportunities that arose from volatility
experienced during the period. Several times we purchased MBS for
forward settlement, pairing them off prior to settlement for a
profit. We believe the Fund currently is positioned well as its
heavy 15-year MBS position, coupled with the stated final maturity
date of the multifamily pool, could provide some protection to the
portfolio from extension risk and the price declines that come with
higher interest rates. If interest rates continue to fall as they
have this period, the portfolio should also perform well as most of
the MBS in the Fund have discount prices, which would not limit
their upside in a rally. Going forward, we believe volatility may
subside as the markets settle in and MBS possibly outperform their
Treasury note counterparts as they have in the past. MBS, with what
looks to us to be very attractive yields, excellent liquidity and
superior credit quality, make a very attractive fixed-income
investment, in our view.
Mercury Growth Opportunity Fund
July 31, 2000 5 Mercury U.S. Government Securities Fund
In Conclusion
We thank you for your interest in Mercury Growth Opportunity Fund
and Mercury U.S. Government Securities Fund of The Asset Program,
Inc. 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
Mercury Growth Opportunity Fund
(Gregory Mark Maunz)
Gregory Mark Maunz
Senior Vice President and Portfolio Manager
Mercury U.S. Government Securities Fund
September 6, 2000
Mercury Growth Opportunity Fund
July 31, 2000 6 Mercury U.S. Government Securities Fund
FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE--MERCURY GROWTH OPPORTUNITY FUND
The Fund offers four classes of shares, each with its own sales
charge and expense structure, allowing you to invest in the way that
best suits your needs.
CLASS I SHARES incur a maximum initial sales charge(front-end load)
of 5.25% and bear no ongoing distribution and account maintenance
fees. Class I shares are available only to eligible investors.
CLASS A SHARES incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
CLASS B SHARES are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first two years, decreasing to
3% for each of the next two years and decreasing 1% each year
thereafter to 0% after the sixth 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 A shares after approximately 8 years.
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 may be
subject to a 1% contingent deferred sales charge if redeemed within
one year after purchase.
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the ex-dividend date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
RECENT PERFORMANCE RESULTS*
6 Month 12 Month Since Inception
As of July 31, 2000 Total Return Total Return Total Return
Class I** +5.31% +30.49% +172.51%
Class A** +5.15 +30.17 +169.88
Class B +4.76 +29.08 +159.72
Class C +4.73 +29.04 +159.27
*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 the Fund's net asset
values for the periods shown, and assume reinvestment of all
dividends and capital gains at net asset value on the ex-dividend
date. The Fund commenced operations on 2/02/96.
**Prior to April 3, 2000, Class I Shares were designated Class A
Shares and Class A Shares were designated Class D Shares.
Mercury Growth Opportunity Fund
July 31, 2000 7 Mercury U.S. Government Securities Fund
FUND PERFORMANCE DATA (CONTINUED)
AVERAGE ANNUAL TOTAL RETURN--
MERCURY GROWTH OPPORTUNITY FUND
% Return % Return
Without Sales With Sales
Class I Shares*++ Charge Charge**
One Year Ended
6/30/00 +27.23% +20.55%
Inception (2/02/96)
through 6/30/00 +25.89 +24.36
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
++Prior to April 3, 2000 Class I Shares were designated Class A
Shares.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
One Year Ended
6/30/00 +25.86% +21.86%
Inception (2/02/96)
through 6/30/00 +24.55 +24.22
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 6 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without Sales With Sales
Class A Shares*++ Charge Charge**
One Year Ended
6/30/00 +26.90% +20.24%
Inception (2/02/96)
through 6/30/00 +25.63 +24.10
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
++Prior to April 3, 2000 Class A Shares were designated Class D
Shares.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
One Year Ended
6/30/00 +25.86% +24.86%
Inception (2/02/96)
through 6/30/00 +24.51 +24.51
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Mercury Growth Opportunity Fund
July 31, 2000 8 Mercury U.S. Government Securities Fund
FUND PERFORMANCE DATA (CONTINUED)
ABOUT FUND PERFORMANCE--
MERCURY U.S. GOVERNMENT SECURITIES FUND
The Fund offers four classes of shares, each with its own sales
charge and expense structure, allowing you to invest in the way that
best suits your needs.
CLASS I SHARES incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution and account maintenance
fees. Class I shares are available only to eligible investors.
CLASS A SHARES incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
CLASS B SHARES are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the two years, decreasing 3% for
each of the next two years and decreasing 1% each year thereafter to
0% after the sixth year. In addition, Class B Shares are subject to
a distribution fee of 0.75% and an account maintenance fee of 0.25%.
The shares automatically convert to Class AShares after
approximately 8 years.
CLASS C SHARES are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C shares may be
subject to a 1% contingent deferred sales charge if redeemed within
one year after purchase.
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 payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
RECENT PERFORMANCE RESULTS*
6 Month 12 Month Since Inception Standardized
As of July 31, 2000 Total Return Total Return Total Return 30-Day Yield
Class I** +4.94% +6.22% +51.82% 6.54%
Class A** +4.81 +5.74 +49.54 6.07
Class B +4.56 +5.22 +45.12 6.02
Class C +4.53 +5.16 +44.65 6.30
*Investment results shown do not reflect sales charges. Results
shown would be lower if sales charges were included. Total
investment returns are based on changes in the Fund's net asset
values for the periods shown, and assume reinvestment of all
dividends and capital gains at net asset value on the payable date.
The Fund commenced operations on 2/01/95.
**Prior to April 3, 2000, Class I Shares were designated Class A
Shares and Class A Shares were designated Class D Shares.
Mercury Growth Opportunity Fund
July 31, 2000 9 Mercury U.S. Government Securities Fund
FUND PERFORMANCE DATA (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN--
MERCURY U.S. GOVERNMENT SECURITIES FUND
% Return % Return
Without Sales With Sales
Class I Shares*++ Charge Charge**
One Year Ended
6/30/00 +5.09% +0.88%
Five Years Ended
6/30/00 +6.82 +5.95
Inception (2/01/95)
through 6/30/00 +7.90 +7.09
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
++Prior to April 3, 2000 Class I Shares were designated Class A
Shares.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
One Year Ended
6/30/00 +4.19% +0.26%
Five Years Ended
6/30/00 +5.96 +5.81
Inception (2/01/95)
through 6/30/00 +7.04 +6.90
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 6 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without Sales With Sales
Class A Shares*++ Charge Charge**
One Year Ended
6/30/00 +4.72% +0.53%
Five Years Ended
6/30/00 +6.56 +5.69
Inception (2/01/95)
through 6/30/00 +7.63 +6.82
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
++Prior to April 3, 2000 Class A Shares were designated Class D
Shares.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
One Year Ended
6/30/00 +4.14% +3.16%
Five Years Ended
6/30/00 +5.90 +5.90
Inception (2/01/95)
through 6/30/00 +6.97 +6.97
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
Mercury Growth Opportunity Fund
July 31, 2000 10 Mercury U.S. Government Securities Fund
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
MERCURY GROWTH OPPORTUNITY FUND
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Advertising 26,000 The Interpublic Group of Companies,
Inc. $ 1,041,625 0.5%
Automobile 6,000 Toyota Motor Corporation (ADR)* 507,750 0.2
Banking & 60,000 Citigroup Inc. 4,233,750 2.0
Financial 15,000 Northern Trust Corporation 1,122,188 0.5
5,200 State Street Corporation 521,950 0.3
-------------- ------
5,877,888 2.8
Beverages 58,000 The Coca-Cola Company 3,556,125 1.7
Biotechnology 3,000 ++Affymetrix, Inc. 409,500 0.2
93,000 ++Immunex Corporation 4,708,125 2.3
-------------- ------
5,117,625 2.5
Broadcasting-- 26,000 ++Infinity Broadcasting Corporation
Media (Class A) 916,500 0.4
Broadcasting-- 20,000 ++AMFM Inc. 1,428,750 0.7
Radio 34,000 ++Clear Channel Communications, Inc. 2,590,375 1.2
& Television 31,700 ++Viacom, Inc. (Class B) 2,102,106 1.0
-------------- ------
6,121,231 2.9
Communications 28,000 ++3Com Corporation 378,000 0.2
Equipment 160,200 ++Cisco Systems, Inc. 10,483,087 5.0
64,000 ++JDS Uniphase Corporation 7,560,000 3.6
138,000 Nortel Networks Corporation 10,263,750 4.9
10,000 ++SDL Inc. 3,468,750 1.7
184,000 Telefonaktiebolaget LM Ericsson (ADR)* 3,611,000 1.7
-------------- ------
35,764,587 17.1
Computers 126,000 ++EMC Corporation 10,725,750 5.1
82,000 ++Sun Microsystems, Inc. 8,645,875 4.1
-------------- ------
19,371,625 9.2
Electrical 198,000 General Electric Company 10,184,625 4.9
Equipment
Electronics 10,000 ++Broadcom Corporation (Class A) 2,242,500 1.1
56,000 ++LSI Logic Corporation 1,897,000 0.9
111,000 STMicroelectronics NV 6,315,150 3.0
50,000 Texas Instruments Incorporated 2,934,375 1.4
14,000 ++Xilinx, Inc. 1,050,875 0.5
-------------- ------
14,439,900 6.9
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 11 Mercury U.S. Government Securities Fund
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Energy 57,800 BP Amoco PLC (ADR)* $ 3,023,662 1.4%
50,000 El Paso Energy Corporation 2,418,750 1.2
79,000 Enron Corp. 5,816,375 2.8
65,000 Exxon Mobil Corporation 5,200,000 2.5
51,000 Royal Dutch Petroleum Company (NY
Registered Shares) 2,970,750 1.4
-------------- ------
19,429,537 9.3
Entertainment 20,000 Sony Corporation (ADR)* 1,878,750 0.9
80,000 The Walt Disney Company 3,095,000 1.5
-------------- ------
4,973,750 2.4
Financial 42,000 T. Rowe Price Associates, Inc. 1,716,750 0.8
Services
Household 50,000 Colgate-Palmolive Company 2,784,375 1.3
Products
Information 110,000 ++America Online, Inc. 5,864,375 2.8
Processing 34,000 ++China.Com Corporation 'A' 550,375 0.3
110,000 ++Exodus Communications, Inc. 4,888,125 2.3
93,551 ++Palm, Inc. 3,648,500 1.8
-------------- ------
14,951,375 7.2
Insurance 51,200 American International Group, Inc. 4,489,600 2.2
Medical 20,000 Medtronic, Inc. 1,021,250 0.5
Technology
Oil Services 77,000 Baker Hughes Incorporated 2,666,125 1.3
30,000 Diamond Offshore Drilling, Inc. 1,126,875 0.5
20,000 Halliburton Company 922,500 0.4
47,000 Schlumberger Limited 3,475,063 1.7
-------------- ------
8,190,563 3.9
Pharmaceuticals 36,000 Merck & Co., Inc. 2,580,750 1.2
134,000 Pfizer Inc. 5,778,750 2.8
-------------- ------
8,359,500 4.0
Restaurants 16,000 McDonald's Corporation 504,000 0.2
Retail-- 4,000 CVS Corporation 157,750 0.1
Specialty 11,000 ++Staples, Inc. 151,250 0.1
15,000 Walgreen Co. 467,813 0.2
-------------- ------
776,813 0.4
Retailing 27,000 ++Amazon.com, Inc. 815,062 0.4
32,000 ++eBay Inc. 1,598,000 0.8
-------------- ------
2,413,062 1.2
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 12 Mercury U.S. Government Securities Fund
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<CAPTION>
In US Dollars
Shares Percent of
Industries Held Common Stocks Value Net Assets
<S> <C> <S> <C> <C>
Semiconductors 34,000 ++Applied Materials, Inc. $ 2,579,750 1.3%
33,000 ++ASM Lithography Holding NV 1,276,623 0.6
40,000 ++KLA-Tencor Corporation 2,127,500 1.0
-------------- ------
5,983,873 2.9
Software-- 77,000 ++BEA Systems, Inc 3,311,000 1.5
Computer 20,000 ++Commerce One, Inc. 841,250 0.4
58,000 ++Oracle Corporation 4,360,875 2.1
8,000 ++Rational Software Corporation 807,500 0.4
20,000 ++Siebel Systems, Inc. 2,896,250 1.4
12,216,875 5.8
Wireless 20,000 ++Sprint Corp. (PCS Group) 1,105,000 0.5
Communication 100,000 Vodafone AirTouch PLC (ADR)* 4,312,500 2.1
4,500 ++Western Wireless Corporation (Class A) 247,500 0.1
-------------- ------
5,665,000 2.7
Wireline 70,000 ++Equant (NY Registered Shares) 2,489,375 1.2
Communication 80,000 ++Infonet Services Corporation (Class B) 1,125,000 0.5
70,000 ++NorthPoint Communications Group, Inc. 822,500 0.4
124,000 ++WorldCom, Inc. 4,836,000 2.3
-------------- ------
9,272,875 4.4
Total Common Stocks
(Cost--$155,519,383) 205,648,679 98.3
Face
Amount Short-Term Securities
Commercial $ 4,649,000 General Motors Acceptance Corp.,
Paper** 6.69% due 8/01/2000 4,649,000 2.2
Total Short-Term Securities
(Cost--$4,649,000) 4,649,000 2.2
Total Investments
(Cost--$160,168,383) 210,297,679 100.5
Liabilities in Excess of Other Assets (978,819) (0.5)
-------------- ------
Net Assets $ 209,318,860 100.0%
============== ======
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 13 Mercury U.S. Government Securities Fund
<TABLE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<CAPTION>
MERCURY U.S. GOVERNMENT SECURITIES FUND
In US Dollars
Face Interest Maturity
Industries Amount Issue Rate Date(s) Value
<S> <C> <S> <C> <C> <C>
US Government $ 1,653,915 Fannie Mae 6.50% 2/01/2012 -
Agency 2/01/2014 $ 1,599,364
Mortgage- 1,000,000 Fannie Mae 8.00 TBA (1) 1,002,810
Backed 1,972,100 Fannie Mae - Multi- 6.18 1/01/2006 1,879,244
Obligations*-- Family #0073313++(2)
92.0% 2,959,836 Freddie Mac - 5.50 3/01/2013 -
Gold Program 5/01/2014 2,754,334
1,440,539 Freddie Mac - 7.00 1/01/2015 1,415,627
Gold Program
979,934 Government National 5.50 3/15/2029 -
Mortgage Association 4/15/2029 873,363
1,857,414 Government National 7.00 6/15/2028 -
Mortgage Association 8/15/2028 1,804,784
2,836,429 Government National 7.50 10/15/2025 -
Mortgage Association 3/15/2028 2,815,735
Total US Government
Agency Mortgage-Backed
Obligations (Cost--$14,748,314) 14,145,261
US Government 500,000 US Treasury Notes 5.75 6/30/2001 496,875
Obligations--
3.2%
Total US Government Obligations
(Cost--$500,920) 496,875
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 14 Mercury U.S. Government Securities Fund
<TABLE>
SCHEDULE OF INVESTMENTS (CONCLUDED)
<CAPTION>
In US Dollars
Face
Amount Short-Term Securities Value
<S> <C> <S> <S>
Repurchase $ 500,000 Donaldson, Lufkin & Jenrette Securities Corp.,
Agree- purchased on 7/31/2000 to yield 6.55% on
ments**--3.3% 8/01/2000 $ 500,000
US Govern- 1,200,000 Federal Home Loan Mortgage Corporation,
ment Agency 6.385% due 8/15/2000 1,197,020
Obliga-
tions***--7.8%
Total Investments in Short-Term Securities
(Cost--$1,697,020) 1,697,020
Total Investments
(Cost--$16,946,254)--106.3% 16,339,156
Liabilities in Excess of Other Assets--(6.3)% (966,063)
-------------
Net Assets--100.0% $ 15,373,093
=============
*Mortgage-Backed Obligations are subject to principal paydowns as a
result of prepayments or refinancing of the underlying mortgage
instruments. As a result, the average life may be substantially less
than the original maturity.
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
***Certain US Government Agency Obligations are traded on a discount
basis; the interest rate shown reflects the discount rate paid at
the time of purchase by the Fund.
++Underlying multi-family loans have prepayment protection by means
of lockout periods and/or yield maintenance premiums.
(1)Represents or includes a "to-be-announced" (TBA) transaction. The
Fund has committed to purchase securities for which all specific
information is not available at this time.
(2)Represents balloon mortgages that amortize on a 30-year schedule
and have 10-year original maturities.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 15 Mercury U.S. Government Securities Fund
<TABLE>
STATEMENTS OF ASSETS AND
LIABILITIES
<CAPTION>
As of July 31, 2000
U.S.
GROWTH GOVERNMENT
OPPORTUNITY SECURITIES
FUND FUND
<S> <C> <C>
Assets:
Investments, at value* $ 210,297,679 $ 16,339,156
Cash 98,471 18,653
Receivables:
Securities sold 2,330,322 --
Capital shares sold 442,054 --
Interest -- 80,062
Dividends 38,334 --
Investment adviser -- 34,676
Deferred organization expenses 16,127 --
Prepaid registration fees and other assets 14,578 26,665
--------------- ------------
Total assets 213,237,565 16,499,212
--------------- ------------
Liabilities:
Payables:
Securities purchased 2,985,647 1,008,021
Capital shares redeemed 284,757 33,347
Distributor 176,420 9,009
Investment adviser 118,898 --
Dividends to shareholders -- 27,014
Accrued expenses and other liabilities 352,983 48,728
--------------- ------------
Total liabilities 3,918,705 1,126,119
--------------- ------------
Net Assets:
Net assets $ 209,318,860 $ 15,373,093
=============== ============
Net Assets Consist of:
Class I Common Stock, $.10 par value++ $ 4,700 $ 1,446
Class A Common Stock, $.10 par value++++ 38,894 5,921
Class B Common Stock, $.10 par value++++++ 558,844 96,171
Class C Common Stock, $.10 par value++++++++ 358,403 50,483
Paid-in capital in excess of par 149,433,755 16,140,233
Accumulated investment loss--net (1,664,020) --
Undistributed (accumulated) realized capital gains (losses) on
investments and foreign currency transactions--net 10,458,988 (314,063)
Unrealized appreciation (depreciation) on investments and
foreign currency transactions--net 50,129,296 (607,098)
--------------- ------------
Net assets $ 209,318,860 $ 15,373,093
=============== ============
Mercury Growth Opportunity Fund
July 31, 2000 16 Mercury U.S. Government Securities Fund
</TABLE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
(CONCLUDED)
<CAPTION>
As of July 31, 2000
U.S.
GROWTH GOVERNMENT
OPPORTUNITY SECURITIES
FUND FUND
<S> <C> <C>
Net Asset Value:
Class I:
Net assets $ 1,048,949 $ 144,524
=============== ============
Shares outstanding 47,001 14,456
=============== ============
Net asset value and redemption price per share $ 22.32 $ 10.00
=============== ============
Class A:
Net assets $ 8,650,903 $ 591,490
=============== ============
Shares outstanding 388,940 59,208
=============== ============
Net asset value and redemption price per share $ 22.24 $ 9.99
=============== ============
Class B:
Net assets $ 121,726,159 $ 9,598,853
=============== ============
Shares outstanding 5,588,437 961,706
=============== ============
Net asset value and redemption price per share $ 21.78 $ 9.98
=============== ============
Class C:
Net assets $ 77,892,849 $ 5,038,226
=============== ============
Shares outstanding 3,584,027 504,825
=============== ============
Net asset value and redemption price per share $ 21.73 $ 9.98
=============== ============
*identified cost $ 160,168,383 $ 16,946,254
=============== ============
++Authorized shares--Class I 6,250,000 26,250,000
=============== ============
++++Authorized shares--Class A 6,250,000 6,250,000
=============== ============
++++++Authorized shares--Class B 10,000,000 26,250,000
=============== ============
++++++++Authorized shares--Class C 6,250,000 6,250,000
=============== ============
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 17 Mercury U.S. Government Securities Fund
<TABLE>
STATEMENTS OF OPERATIONS
<CAPTION>
For the Six Months Ended July 31, 2000
U.S.
GROWTH GOVERNMENT
OPPORTUNITY SECURITIES
FUND FUND
<S> <C> <C>
Investment Income:
Interest and discount earned $ 185,500 $ 498,837
Dividends* 535,858 --
-------------- ------------
Total income 721,358 498,837
-------------- ------------
Expenses:
Investment advisory fees 685,851 37,270
Account maintenance and distribution fees--Class B 616,928 38,416
Account maintenance and distribution fees--Class C 391,348 15,492
Transfer agent fees--Class B 213,785 17,559
Transfer agent fees--Class C 144,731 7,493
Accounting services 126,826 13,485
Printing and shareholder reports 63,671 5,476
Professional fees 52,536 5,595
Registration fees 27,219 14,602
Custodian fees 21,154 8,308
Transfer agent fees--Class A 11,718 963
Account maintenance fees--Class A 10,465 817
Amortization of organization expenses 7,232 --
Directors' fees and expenses 5,660 601
Pricing fees 474 1,551
Transfer agent fees--Class I 1,410 201
Other 4,370 1,242
-------------- ------------
Total expenses before reimbursement 2,385,378 169,071
Reimbursement of expenses -- (114,345)
-------------- ------------
Total expenses after reimbursement 2,385,378 54,726
-------------- ------------
Investment income (loss)--net (1,664,020) 444,111
-------------- ------------
Realized & Unrealized Gain (Loss) on Investments
& Foreign Currency Transactions--Net:
Realized gain (loss) from:
Investments--net 10,479,095 (2,559)
Foreign currency transactions--net (19) --
Change in unrealized appreciation/depreciation on
investments--net 611,517 245,907
-------------- ------------
Net Increase in Net Assets Resulting from Operations $ 9,426,573 $ 687,459
============== ============
*Net of foreign withholding tax on dividends $ 15,343 --
============== ============
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 18 Mercury U.S. Government Securities Fund
<TABLE>
STATEMENTS OF CHANGES
IN NET ASSETS
<CAPTION>
MERCURY GROWTH OPPORTUNITY FUND
For the Six For the
Months Ended Year Ended
July 31, January 31,
Increase (Decrease)in Net Assets: 2000 2000
<S> <C> <C>
Operations:
Investment loss--net $ (1,664,020) $ (1,742,490)
Realized gain on investments--net 10,479,076 14,672,125
Change in unrealized appreciation on investments--net 611,517 23,507,783
------------ ------------
Net increase in net assets resulting from operations 9,426,573 36,437,418
------------ ------------
Distributions to Shareholders:
Realized gain on investments--net:
Class I (39,956) (42,617)
Class A (299,716) (351,501)
Class B (3,733,758) (5,412,879)
Class C (2,405,294) (3,397,098)
------------ ------------
Net decrease in net assets resulting from distributions
to shareholders (6,478,724) (9,204,095)
------------ ------------
Capital Share Transactions:
Net increase in net assets derived from capital share
transactions 9,907,109 54,637,630
------------ ------------
Net Assets:
Total increase in net assets 12,854,958 81,870,953
Beginning of period 196,463,902 114,592,949
------------ ------------
End of period $209,318,860 $196,463,902
============ ============
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 19 Mercury U.S. Government Securities Fund
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
(CONCLUDED)
<CAPTION>
MERCURY U.S. GOVERNMENT SECURITIES FUND
For the Six For the
Months Ended Year Ended
July 31, January 31,
Increase (Decrease)in Net Assets: 2000 2000
<S> <C> <C>
Operations:
Investment income--net $ 444,111 $ 1,125,604
Realized loss on investments--net (2,559) (301,986)
Change in unrealized depreciation on investments--net 245,907 (1,043,664)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 687,459 (220,046)
------------ ------------
Dividends to Shareholders:
Investment income--net:
Class I (4,578) (30,860)
Class A (21,068) (71,339)
Class B (304,485) (797,265)
Class C (113,980) (226,140)
------------ ------------
Net decrease in net assets resulting from dividends
to shareholders (444,111) (1,125,604)
------------ ------------
Capital Share Transactions:
Net decrease in net assets derived from capital share
transactions (1,163,745) (4,836,182)
------------ ------------
Net Assets:
Total decrease in net assets (920,397) (6,181,832)
Beginning of period 16,293,490 22,475,322
------------ ------------
End of period $ 15,373,093 $ 16,293,490
============ ============
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 20 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
MERCURY GROWTH OPPORTUNITY FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class I+++++
For the
For the Six Period
Months Feb. 2,
Ended 1996++ to
Increase (Decrease) in July 31, For the Year Ended January 31, Jan. 31,
Net Asset Value: 2000++++ 2000++++ 1999++++ 1998++++ 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 22.01 $ 18.53 $ 13.42 $ 11.79 $ 10.00
--------------------------------------------------------------
Investment income (loss)--net (.06) (.01) (.06) (.07) .03
Realized and unrealized gain on
investments--net 1.24 4.58 5.63 2.83 1.76
--------------------------------------------------------------
Total from investment operations 1.18 4.57 5.57 2.76 1.79
--------------------------------------------------------------
Less distributions from realized gain
on investments--net (.87) (1.09) (.46) (1.13) --
--------------------------------------------------------------
Net asset value, end of period $ 22.32 $ 22.01 $ 18.53 $ 13.42 $ 11.79
==============================================================
Total Investment Return:**
Based on net asset value per
share 5.31%+++ 25.11% 42.02% 23.52% 17.90%+++
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement 1.22%* 1.36% 1.56% 1.98% 2.44%*
==============================================================
Expenses 1.22%* 1.36% 1.56% 1.98% 3.08%*
==============================================================
Investment income (loss)--net (.54%)* (.07%) (.39%) (.55%) .23%*
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 1,049 $ 939 $ 582 $ 207 $ 58
==============================================================
Portfolio turnover 31.35% 81.27% 40.59% 60.24% 51.63%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Prior to April 3, 2000, Class I Shares were designated as Class
A Shares.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 21 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS(CONTINUED)
<CAPTION>
MERCURY GROWTH OPPORTUNITY FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class A+++++
For the
For the Six Period
Months Feb. 2,
Ended 1996++ to
Increase (Decrease) in July 31, For the Year Ended January 31, Jan. 31,
Net Asset Value: 2000++++ 2000++++ 1999++++ 1998++++ 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 21.93 $ 18.51 $ 13.42 $ 11.78 $ 10.00
--------------------------------------------------------------
Investment loss--net (.09) (.07) (.10) (.11) (.11)
Realized and unrealized gain on
investments--net 1.23 4.58 5.62 2.84 1.89
--------------------------------------------------------------
Total from investment operations 1.14 4.51 5.52 2.73 1.78
--------------------------------------------------------------
Less distributions from realized
gain on investments--net (.83) (1.09) (.43) (1.09) --
--------------------------------------------------------------
Net asset value, end of period $ 22.24 $ 21.93 $ 18.51 $ 13.42 $ 11.78
==============================================================
Total Investment Return:**
Based on net asset value per
share 5.15%+++ 24.80% 41.59% 23.30% 17.80%+++
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement 1.47%* 1.62% 1.80% 2.23% 2.94%*
==============================================================
Expenses 1.47%* 1.62% 1.80% 2.23% 3.13%*
==============================================================
Investment loss--net (.79%)* (.34%) (.64%) (.80%) (1.00%)*
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 8,651 $ 7,659 $ 3,700 $ 1,612 $ 819
==============================================================
Portfolio turnover 31.35% 81.27% 40.59% 60.24% 51.63%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Prior to April 3, 2000, Class A Shares were designated as Class
D Shares.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 22 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS(CONTINUED)
<CAPTION>
MERCURY GROWTH OPPORTUNITY FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class B+++++
For the
For the Six Period
Months Feb. 2,
Ended 1996++ to
Increase (Decrease) in July 31, For the Year Ended January 31, Jan. 31,
Net Asset Value: 2000++++ 2000++++ 1999++++ 1998++++ 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 21.44 $ 18.26 $ 13.27 $ 11.68 $ 10.00
--------------------------------------------------------------
Investment loss--net (.18) (.22) (.23) (.22) (.21)
Realized and unrealized gain on
investments--net 1.21 4.48 5.54 2.80 1.89
--------------------------------------------------------------
Total from investment operations 1.03 4.26 5.31 2.58 1.68
--------------------------------------------------------------
Less distributions from realized gain
on investments--net (.69) (1.08) (.32) (.99) --
--------------------------------------------------------------
Net asset value, end of period $ 21.78 $ 21.44 $ 18.26 $ 13.27 $ 11.68
==============================================================
Total Investment Return:**
Based on net asset value per
share 4.76%+++ 23.76% 40.41% 22.16% 16.80%+++
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement 2.28%* 2.45% 2.66% 3.09% 3.84%*
==============================================================
Expenses 2.28%* 2.45% 2.66% 3.09% 4.00%*
==============================================================
Investment loss--net (1.60%)* (1.16%) (1.50%) (1.66%) (1.93%)*
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $121,726 $115,216 $ 69,601 $ 25,752 $ 9,816
==============================================================
Portfolio turnover 31.35% 81.27% 40.59% 60.24% 51.63%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 23 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS(CONTINUED)
<CAPTION>
MERCURY GROWTH OPPORTUNITY FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class C+++++
For the
For the Six Period
Months Feb. 2,
Ended 1996++ to
Increase (Decrease) in July 31, For the Year Ended January 31, Jan. 31,
Net Asset Value: 2000++++ 2000++++ 1999++++ 1998++++ 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 21.40 $ 18.24 $ 13.26 $ 11.67 $ 10.00
--------------------------------------------------------------
Investment loss--net (.18) (.23) (.24) (.23) (.22)
Realized and unrealized gain on
investments--net 1.20 4.47 5.55 2.81 1.89
--------------------------------------------------------------
Total from investment operations 1.02 4.24 5.31 2.58 1.67
--------------------------------------------------------------
Less distributions from realized
gain on investments--net (.69) (1.08) (.33) (.99) --
--------------------------------------------------------------
Net asset value, end of period $ 21.73 $ 21.40 $ 18.24 $ 13.26 $ 11.67
--------------------------------------------------------------
Total Investment Return:**
Based on net asset value per
share 4.73%+++ 23.68% 40.39% 22.17% 16.70%+++
===============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement 2.31%* 2.48% 2.71% 3.14% 3.88%*
===============================================================
Expenses 2.31%* 2.48% 2.71% 3.14% 4.05%*
===============================================================
Investment loss--net (1.62%)* (1.20%) (1.55%) (1.71%) (1.98%)*
===============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 77,893 $ 72,650 $ 40,710 $ 13,059 $ 4,649
===============================================================
Portfolio turnover 31.35% 81.27% 40.59% 60.24% 51.63%
===============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 24 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS(CONTINUED)
<CAPTION>
MERCURY U.S.GOVERNMENT SECURITIES FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class I
For the Six
Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2000 2000 1999 1998 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.85 $ 10.52 $ 10.48 $ 10.20 $ 10.48
--------------------------------------------------------------
Investment income--net .33 .64 .64 .69 .69
Realized and unrealized gain (loss)
on investments--net .15 (.67) .21 .35 (.21)
--------------------------------------------------------------
Total from investment operations .48 (.03) .85 1.04 .48
--------------------------------------------------------------
Less dividends and distributions:
Investment income--net (.33) (.64) (.64) (.69) (.69)
Realized gain on
investments--net -- -- (.17) (.07) (.07)
In excess of realized gain on
investments--net -- -- --++ -- --
--------------------------------------------------------------
Total dividends and distributions (.33) (.64) (.81) (.76) (.76)
--------------------------------------------------------------
Net asset value, end of period $ 10.00 $ 9.85 $ 10.52 $ 10.48 $ 10.20
==============================================================
Total Investment Return:**
Based on net asset value per
share 4.94%+++ (.28%) 8.39% 10.66% 4.76%
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement .00%* .00% .00% .00% .00%
==============================================================
Expenses 1.47%* 1.38% 1.73% 2.00% 2.92%
==============================================================
Investment income--net 6.67%* 6.22% 6.13% 6.80% 6.69%
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 145 $ 140 $ 1,278 $ 3,233 $ 4,486
==============================================================
Portfolio turnover 23.89% 91.75% 310.91% 361.31% 27.32%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
++++Prior to April 3, 2000, Class I Shares were designated as Class
A Shares.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 25 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS(CONTINUED)
<CAPTION>
MERCURY U.S.GOVERNMENT SECURITIES FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class A
For the Six
Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2000 2000 1999 1998 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.84 $ 10.52 $ 10.48 $ 10.20 $ 10.48
--------------------------------------------------------------
Investment income--net .32 .61 .61 .67 .66
Realized and unrealized gain (loss)
on investments--net .15 (.68) .21 .35 (.21)
--------------------------------------------------------------
Total from investment operations .47 (.07) .82 1.02 .45
--------------------------------------------------------------
Less dividends and distributions:
Investment income--net (.32) (.61) (.61) (.67) (.66)
Realized gain on
investments--net -- -- (.17) (.07) (.07)
In excess of realized gain on
investments--net -- -- --++ -- --
--------------------------------------------------------------
Total dividends and distributions (.32) (.61) (.78) (.74) (.73)
--------------------------------------------------------------
Net asset value, end of period $ 9.99 $ 9.84 $ 10.52 $ 10.48 $ 10.20
==============================================================
Total Investment Return:**
Based on net asset value per
share 4.81%+++ (.63%) 8.12% 10.38% 4.49%
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement .25%* .25% .25% .25% .21%
==============================================================
Expenses 1.73%* 1.67% 1.67% 2.25% 3.14%
==============================================================
Investment income--net 6.43%* 6.02% 5.73% 6.53% 6.42%
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 591 $ 708 $ 1,701 $ 315 $ 313
==============================================================
Portfolio turnover 23.89% 91.75% 310.91% 361.31% 27.32%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
++++Prior to April 3, 2000, Class A Shares were designated as Class
D Shares.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 26 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS(CONTINUED)
<CAPTION>
MERCURY U.S.GOVERNMENT SECURITIES FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class B
For the Six
Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2000 2000 1999 1998 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.83 $ 10.51 $ 10.48 $ 10.20 $ 10.48
--------------------------------------------------------------
Investment income--net .29 .56 .56 .61 .60
Realized and unrealized gain (loss)
on investments--net .15 (.68) .20 .35 (.21)
--------------------------------------------------------------
Total from investment operations .44 (.12) .76 .96 .39
--------------------------------------------------------------
Less dividends and distributions:
Investment income--net (.29) (.56) (.56) (.61) (.60)
Realized gain on
investments--net -- -- (.17) (.07) (.07)
In excess of realized gain on
investments--net -- -- --++ -- --
--------------------------------------------------------------
Total dividends and distributions (.29) (.56) (.73) (.68) (.67)
--------------------------------------------------------------
Net asset value, end of period $ 9.98 $ 9.83 $ 10.51 $ 10.48 $ 10.20
==============================================================
Total Investment Return:**
Based on net asset value per
share 4.56%+++ (1.13%) 7.48% 9.76% 3.90%
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement .75%* .75% .75% .75% .75%
==============================================================
Expenses 2.27%* 2.22% 2.34% 2.82% 3.72%
==============================================================
Investment income--net 5.93%* 5.54% 5.26% 5.94% 5.85%
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 9,599 $ 12,045 $ 14,817 $ 6,627 $ 4,514
==============================================================
Portfolio turnover 23.89% 91.75% 310.91% 361.31% 27.32%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 27 Mercury U.S. Government Securities Fund
<TABLE>
FINANCIAL HIGHLIGHTS (CONCLUDED)
<CAPTION>
MERCURY U.S.GOVERNMENT SECURITIES FUND
The following per share data and ratios have been derived from
information provided in the financial statements.
Class C
For the Six
Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2000 2000 1999 1998 1997
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.83 $ 10.51 $ 10.48 $ 10.19 $ 10.47
--------------------------------------------------------------
Investment income--net .29 .56 .55 .60 .59
Realized and unrealized gain (loss)
on investments--net .15 (.68) .20 .36 (.21)
--------------------------------------------------------------
Total from investment operations .44 (.12) .75 .96 .38
--------------------------------------------------------------
Less dividends and distributions:
Investment income--net (.29) (.56) (.55) (.60) (.59)
Realized gain on
investments--net -- -- (.17) (.07) (.07)
In excess of realized gain on
investments--net -- -- --++ -- --
--------------------------------------------------------------
Total dividends and distributions (.29) (.56) (.72) (.67) (.66)
--------------------------------------------------------------
Net asset value, end of period $ 9.98 $ 9.83 $ 10.51 $ 10.48 $ 10.19
==============================================================
Total Investment Return:**
Based on net asset value per
share 4.53%+++ (1.18%) 7.43% 9.79% 3.83%
==============================================================
Ratios to Average Net Assets:
Expenses, net of reimbursement .80%* .80% .80% .80% .85%
==============================================================
Expenses 2.36%* 2.33% 2.47% 2.90% 3.78%
==============================================================
Investment income--net 5.87%* 5.49% 5.21% 5.88% 5.78%
==============================================================
Supplemental Data:
Net assets, end of period
(in thousands) $ 5,038 $ 3,400 $ 4,679 $ 2,057 $ 1,757
==============================================================
Portfolio turnover 23.89% 91.75% 310.91% 361.31% 27.32%
==============================================================
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Mercury Growth Opportunity Fund
July 31, 2000 28 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
Mercury Growth Opportunity Fund &
Mercury U.S. Government Securities Fund
1 Significant Accounting Policies:
Mercury Growth Opportunity Fund (formerly Growth Opportunity
Portfolio) and Mercury U.S. Government Securities Fund (formerly US
Government Securities Portfolio) (the "Fund" or "Funds") are part of
The Asset Program, Inc. (the "Program") (formerly Merrill Lynch
Asset Builder Program, Inc.), which is registered under the
Investment Company Act of 1940 as an open-end management investment
company. The Growth Opportunity Fund is classified as non-
diversified and the U.S. Government Securities Fund is classified as
a diversified. The Funds' financial statements are prepared in
accordance with accounting principles generally accepted in the
United States of America, which may require the use of management
accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary
to a fair statement of the results for the interim period presented.
All such adjustments are of a normal recurring nature. Each Fund
offers four classes of shares. Class I and Class A Shares are sold
with a front-end sales charge. Class B and Class C Shares may be
subject to a contingent deferred sales charge. All classes of shares
have identical voting, dividend, liquidation and other rights and
the same terms and conditions, except that Class A, Class B and
Class C Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures (except
that Class B shareholders may vote upon any material changes under
the distribution plan for Class A Shares). The following is a
summary of significant accounting policies followed by the Funds.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities that are traded in the over-
the-counter market are valued at the last available bid price in the
over-the-counter market prior to the time of valuation. In cases
where securities are traded on more than one exchange, the
securities are valued on the exchange designated by or under the
authority of the Board of Directors as the primary market.
Securities that are traded both in the over-the-counter market and
on a stock exchange are valued according to the broadest and most
representative market. Options written or purchased are valued at
the last sale price in the case of exchange-traded options. In the
case of options traded in the over-the-counter market, valuation is
the last asked price (options written) or the last bid price
(options purchased). Short-term securities are valued at amortized
cost, which approximates market value. Other investments, including
financial futures contracts and related options, are stated at
market value. Securities and assets for which market quotations are
not readily available are valued at fair market value as determined
in good faith by or under the direction of the Program's Board of
Directors.
Mercury Growth Opportunity Fund
July 31, 2000 29 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(b) Repurchase agreements--Each Fund may invest in securities
pursuant to repurchase agreements. Under such agreements, the
counterparty agrees to repurchase the security at a mutually agreed
upon time and price. The Fund takes possession of the underlying
securities, marks to market such securities and, if necessary,
receives additions to such securities daily to ensure that the
contract is fully collateralized. If the counterparty defaults and
the fair value of the collateral declines, liquidation of the
collateral by the Fund may be delayed or limited.
(c) Derivative financial instruments--Each Fund may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which each Fund is exposed more quickly and
efficiently than transactions in other types of instruments. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Funds may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the Funds
deposit and maintain as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Funds agree to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin
and are recorded by the Funds as unrealized gains or losses. When
the contract is closed, the Funds record a realized gain or loss
equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
* Options--The Funds are authorized to purchase and write call and
put options. When the Funds write an option, an amount equal to the
premium received by the Funds is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Funds enter into a closing transaction), the Funds
realize a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
Mercury Growth Opportunity Fund
July 31, 2000 30 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
* Forward foreign exchange contracts--The Growth Opportunity Fund is
authorized to enter into forward foreign exchange contracts as a
hedge against either specific transactions or portfolio positions.
Such contracts are not entered on the Fund's records. However, the
effect on operations is recorded from the date the Fund enters into
such contracts.
* Foreign currency options and futures--The Growth Opportunity Fund
may also purchase or sell listed or over-the-counter foreign
currency options, foreign currency futures and related options on
foreign currency futures as a short or long hedge against possible
variations in foreign exchange rates. Such transactions may be
effected with respect to hedges on non-US dollar denominated
securities owned by the Fund, sold by the Fund but not yet
delivered, or committed or anticipated to be purchased by the Fund.
(d) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(e) Income taxes--It is each Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
(f) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Funds have determined the ex-dividend date. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
(g) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a period not exceeding five years. Prepaid
registration fees are charged to expense as the related shares are
issued.
(h) Dividends and distributions--Dividends from net investment
income of the U.S. Government Securities Fund are declared daily and
paid monthly. Dividends from net investment income of the Growth
Opportunity Fund are recorded on the ex-dividend dates.
Distributions of capital gains for the Funds are recorded on the ex-
dividend dates. Distributions in excess of realized gains for the
U.S. Government Securities Fund are due primarily to differing tax
treatments for futures transactions and post-October losses.
Mercury Growth Opportunity Fund
July 31, 2000 31 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(i) Dollar rolls--The US Government Securities Fund sells mortgage-
backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same
type, coupon and maturity) securities on a specific future date.
2 Investment Advisory Agreement and Transactions with Affiliates:
The Program has entered into an Investment Advisory Agreement with
Fund Investment Management, L.P. ("FAM"). The general partner of FAM
is Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Program has also entered into a Distribution
Agreement and Distribution Plans with FAM Distributors, Inc. ("FAMD"
or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
FAM is responsible for the management of the Program's portfolios
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Program.
For such services, each Fund pays a monthly fee based on the average
daily value of that Fund's net assets at the following annual rates:
.65% for the Growth Opportunity Fund and .50% for the U.S.
Government Securities Fund. For the six months ended July 31, 2000,
FAM earned fees of $37,270 from the U.S. Government Securities Fund,
all of which were waived. FAM also reimbursed the U.S. Government
Securities Fund for additional expenses of $77,075.
Pursuant to the Distribution Plans adopted by the Program in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
each Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at
annual rates based upon the average daily net assets of the shares
as follows:
Account Maintenance Fees
Class A Class B Class C
Growth Opportunity Fund .25% .25% .25%
U.S. Government Securities Fund .25% .25% .25%
Distribution Fees
Class B Class C
Growth Opportunity Fund .75% .75%
U.S. Government Securities Fund .50% .55%
Mercury Growth Opportunity Fund
July 31, 2000 32 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Program. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class A, Class B and Class C shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended July 31, 2000, FAMD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of each
Fund's Class I and Class A Shares as follows:
FAMD MLPF&S
Class I Class A Class I Class A
Growth Opportunity Fund $6 $934 $127 $18,227
U.S. Government Securities Fund -- $ 47 -- $ 736
For the six months ended July 31, 2000, MLPF&S received contingent
deferred sales charges relating to transactions in Class B and Class
C Shares as follows:
Class B Shares Class C Shares
Growth Opportunity Fund $112,584 $13,196
U.S. Government Securities Fund $ 20,024 $ 888
In addition, MLPF&S received $13,313 in commissions on the execution
of portfolio security transactions for the Growth Opportunity Fund
for the six months ended July 31, 2000.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Program's transfer agent.
During the six months ended July 31, 2000, U.S. Government
Securities Fund paid Merrill Lynch Security Pricing Service, an
affiliate of MLPF&S $170 for security price quotations to compute
the net asset value of the Fund.
Accounting services are provided to each Fund by FAM at cost.
Certain officers and/or directors of the Program are officers and/or
directors of FAM, PSI, FDS, FAMD, and/or ML & Co.
3 Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended July 31, 2000 were as follows:
Purchases Sales
Growth Opportunity Fund $67,720,659 $64,111,546
U.S. Government Securities Fund $ 3,463,125 $ 4,545,831
Net realized gains (losses) for the six months ended July 31, 2000
and net unrealized gains (losses) as of July 31, 2000 were as
follows:
Mercury Growth Opportunity Fund
July 31, 2000 33 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Realized Unrealized
GROWTH OPPORTUNITY FUND Gains (Losses) Gains
Long-term investments $ 10,479,189 $ 50,129,296
Short-term investments (94) --
Foreign currency transactions (19) --
------------------------------
Total $ 10,479,076 $ 50,129,296
==============================
Realized Unrealized
U.S. GOVERNMENT SECURITIES FUND Losses Losses
Long-term investments $ (2,559) $ (607,098)
------------------------------
Total $ (2,559) $ (607,098)
==============================
As of July 31, 2000, net unrealized appreciation (depreciation) for
Federal income tax purposes was as follows:
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
Growth Opportunity Fund $ 64,573,611 $ 14,444,315 $ 50,129,296
U.S. Government Securities Fund -- $ 607,098 $ (607,098)
The aggregate cost of investments at July 31, 2000 for Federal
income tax purposes was $160,168,383 for the Growth Opportunity Fund
and $16,946,254 for the U.S. Government Securities Fund.
4 Capital Share Transactions:
Prior to April 3, 2000, Class I Shares were designated as Class A
Shares and Class A Shares were designated as Class D Shares.
Net increase (decrease) in net assets derived from capital share
transactions for the six months ended July 31, 2000 and for the year
ended January 31, 2000, respectively, were as follows:
For the Six For the Year
Months Ended Ended
July 31, 2000 Jan. 31, 2000
Growth Opportunity Fund $ 9,907,109 $ 54,637,630
U.S. Government Securities Fund $ (1,163,745) $ (4,836,182)
Transactions in capital shares for each class were as follows:
GROWTH OPPORTUNITY FUND
Class I Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 12,178 $ 282,934
Shares issued to shareholders in reinvestment
of distributions 1,370 30,810
------------------------------
Total issued 13,548 313,744
Shares redeemed (9,194) (219,226)
------------------------------
Net increase 4,354 $ 94,518
==============================
Mercury Growth Opportunity Fund
July 31, 2000 34 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
GROWTH OPPORTUNITY FUND
Class I Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 21,772 $ 420,701
Shares issued to shareholders in reinvestment
of distributions 1,619 33,261
------------------------------
Total issued 23,391 453,962
Shares redeemed (12,135) (232,123)
------------------------------
Net increase 11,256 $ 221,839
=============================
GROWTH OPPORTUNITY FUND
Class A Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 54,536 $ 1,277,555
Automatic conversion of shares 13,160 308,894
Shares issued to shareholders in reinvestment
of distributions 11,891 266,597
------------------------------
Total issued 79,587 1,853,046
Shares redeemed (39,937) (934,937)
------------------------------
Net increase 39,650 $ 918,109
==============================
GROWTH OPPORTUNITY FUND
Class A Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 154,235 $ 2,954,775
Automatic conversion of shares 33,885 640,621
Shares issued to shareholders in reinvestment
of distributions 15,224 311,638
------------------------------
Total issued 203,344 3,907,034
Shares redeemed (53,937) (1,031,118)
------------------------------
Net increase 149,407 $ 2,875,916
==============================
GROWTH OPPORTUNITY FUND
Class B Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 607,523 $ 13,961,279
Shares issued to shareholders in reinvestment
of distributions 147,188 3,233,721
------------------------------
Total issued 754,711 17,195,000
Automatic conversion of shares (13,471) (308,894)
Shares redeemed (525,990) (12,149,551)
------------------------------
Net increase 215,250 $ 4,736,555
==============================
Mercury Growth Opportunity Fund
July 31, 2000 35 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
GROWTH OPPORTUNITY FUND
Class B Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 2,065,639 $ 38,992,818
Shares issued to shareholders in reinvestment
of distributions 235,171 4,712,817
------------------------------
Total issued 2,300,810 43,705,635
Automatic conversion of shares (34,459) (640,621)
Shares redeemed (704,119) (13,477,819)
------------------------------
Net increase 1,562,232 $ 29,587,195
==============================
GROWTH OPPORTUNITY FUND
Class C Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 494,305 $ 11,303,915
Shares issued to shareholders in reinvestment
of distributions 93,265 2,044,369
------------------------------
Total issued 587,570 13,348,284
Shares redeemed (398,106) (9,190,357)
------------------------------
Net increase 189,464 $ 4,157,927
==============================
GROWTH OPPORTUNITY FUND
Class C Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 1,517,492 $ 28,612,023
Shares issued to shareholders in reinvestment
of distributions 144,686 2,893,704
------------------------------
Total issued 1,662,178 31,505,727
Shares redeemed (499,938) (9,553,047)
------------------------------
Net increase 1,162,240 $ 21,952,680
==============================
U.S. GOVERNMENT SECURITIES FUND
Class I Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 3,511 $ 35,005
Shares issued to shareholders in reinvestment
of dividends 431 4,280
------------------------------
Total issued 3,942 39,285
Shares redeemed (3,743) (37,202)
------------------------------
Net increase 199 $ 2,083
==============================
Mercury Growth Opportunity Fund
July 31, 2000 36 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
Class I Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 17,324 $ 178,161
Shares issued to shareholders in reinvestment
of dividends 3,127 32,093
------------------------------
Total issued 20,451 210,254
Shares redeemed (127,755) (1,313,322)
------------------------------
Net decrease (107,304) $ (1,103,068)
==============================
U.S. GOVERNMENT SECURITIES FUND
Class A Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 3,149 $ 31,142
Automatic conversion of shares 2,424 23,957
Shares issued to shareholders in reinvestment
of dividends 1,679 16,656
------------------------------
Total issued 7,252 71,755
Shares redeemed (19,987) (197,070)
------------------------------
Net decrease (12,735) $ (125,315)
==============================
U.S. GOVERNMENT SECURITIES FUND
Class A Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 16,527 $ 169,760
Automatic conversion of shares 2,160 21,885
Shares issued to shareholders in reinvestment
of dividends 4,832 49,378
------------------------------
Total issued 23,519 241,023
Shares redeemed (113,260) (1,154,809)
------------------------------
Net decrease (89,741) $ (913,786)
==============================
U.S. GOVERNMENT SECURITIES FUND
Class B Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 93,639 $ 926,299
Shares issued to shareholders in reinvestment
of dividends 20,316 201,252
------------------------------
Total issued 113,955 1,127,551
Automatic conversion of shares (2,426) (23,957)
Shares redeemed (375,274) (3,701,140)
------------------------------
Net decrease (263,745) $ (2,597,546)
==============================
Mercury Growth Opportunity Fund
July 31, 2000 37 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
U.S. GOVERNMENT SECURITIES FUND
Class B Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 565,860 $ 5,779,648
Shares issued to shareholders in reinvestment
of dividends 56,455 573,274
------------------------------
Total issued 622,315 6,352,922
Automatic conversion of shares (2,161) (21,885)
Shares redeemed (804,061) (8,148,209)
------------------------------
Net decrease (183,907) $ (1,817,172)
==============================
U.S. GOVERNMENT SECURITIES FUND
Class C Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 234,163 $ 2,301,022
Shares issued to shareholders in reinvestment
of dividends 9,056 89,831
------------------------------
Total issued 243,219 2,390,853
Shares redeemed (84,288) (833,820)
------------------------------
Net increase 158,931 $ 1,557,033
==============================
U.S. GOVERNMENT SECURITIES FUND
Class C Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 142,652 $ 1,464,961
Shares issued to shareholders in reinvestment
of dividends 18,021 183,060
------------------------------
Total issued 160,673 1,648,021
Shares redeemed (259,845) (2,650,177)
------------------------------
Net decrease (99,172) $ (1,002,156)
==============================
5 Short-Term Borrowings:
On December 3, 1999, the Funds, along with certain other funds
managed by FAM and its affiliates, entered into a one-year,
unsecured $1,000,000,000 credit agreement with The Bank of New York
and other lenders. The funds may borrow money for temporary or
emergency purposes to meet shareholder redemptions. Each fund may
borrow up to the maximum amount allowable under the fund's current
prospectus and statement of additional information, subject to
various other legal, regulatory or contractual limits. The funds
collectively pay a commitment fee of .09% per annum on the available
portion of the facility. Amounts borrowed under the facility bear
interest at the Federal Funds rate plus .50% The Funds did not
borrow from the facility during the six months ended July 31, 2000.
Mercury Growth Opportunity Fund
July 31, 2000 38 Mercury U.S. Government Securities Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
6 Capital Loss Carryforward:
At January 31, 2000, U.S. Government Securities Fund had a net
capital loss carryforward of approximately $70,000, all of which
expires in 2008. This amount will be available to offset like
amounts of any future taxable gains.
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
Christopher G. Ayoub, Senior
Vice President
R. Elise Baum, Senior Vice President
Robert C. Doll, Jr., Senior Vice President
Lawrence R. Fuller, Senior Vice President
Gregory Mark Maunz, Senior
Vice President
Joseph T. Monagle Jr., Senior
Vice President
Thomas R. Robinson, Senior
Vice President
Donald C. Burke, Vice President and
Treasurer
Allan J. Oster, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(888) 763-2260
Mercury Growth Opportunity Fund
July 31, 2000 39 Mercury U.S. Government Securities Fund
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Funds unless
accompanied or preceded by the Funds' 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.
Mercury Growth Opportunity Fund
Mercury U.S. Government Securities Fund
of The Asset Program, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
