MERRILL LYNCH
MID CAP
VALUE FUND
FUND LOGO
Semi-Annual Report
July 31, 2000
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Mid Cap Value Fund
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH MID CAP VALUE FUND
Worldwide
Investments as of
July 31, 2000
Percent of
Ten Largest Holdings Net Assets
Network Associates, Inc. 3.2%
St. Jude Medical, Inc. 2.4
Ace Limited 2.3
Office Depot, Inc. 2.3
Banknorth Group, Inc. 2.2
PeopleSoft, Inc. 2.1
Sungard Data Systems Inc. 2.1
ANTEC Corporation 2.0
The Chubb Corporation 1.9
Cendant Corporation 1.8
Percent of
Ten Largest Industries Net Assets
Technology 21.4%
Consumer Cyclicals 14.7
Financials 12.6
Consumer Staples 9.4
Healthcare 8.7
Capital Goods 7.5
Energy 6.6
Transportation 2.6
Basic Materials 2.5
Utilities 2.3
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
(800) 637-3863
Merrill Lynch Mid Cap Value Fund, July 31, 2000
DEAR SHAREHOLDER
Effective April 3, 2000, the Fundamental Value Portfolio of Merrill
Lynch Asset Builder, Inc. changed its name to Merrill Lynch Mid Cap
Value Fund of The Asset Program, Inc. In addition, the Fund
initiated a transition from a multi cap fund to a fund focused
primarily on the mid-capitalization segment of the market.
Portfolio Matters
For the six-month period ended July 31, 2000, Merrill Lynch Mid Cap
Value Fund's Class A, Class B, Class C and Class D Shares had total
returns of +5.53%, +4.92%, +5.02% and +5.39%, respectively. (Fund
results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be
found on pages 4 and 5 of this report to shareholders.)
Merrill Lynch Mid Cap Value Fund seeks capital appreciation and,
secondarily, income by investing in securities, primarily equities,
that Fund management believes are undervalued and therefore
represent an investment value. We look to invest in a diversified
portfolio of mid cap securities, primarily common stocks, of
companies with market capitalizations in the same range as the S&P
MidCap 400 Index, a widely recognized index of mid cap stock
performance. We target mid-capitalization companies that offer
special investment value in terms of their products or services,
research capabilities or other unique attributes, or whose shares
are relatively undervalued compared to their favorable investment
potential.
In keeping with Merrill Lynch Mid Cap Value Fund's guidelines, we
initiated the transition from a multi cap portfolio to a fund
focused on the mid cap segment of the market. Accordingly, the
portfolio experienced above-average turnover in the period as we
reduced the median market capitalization of Fund holdings from $10
billion at the beginning of the period to approximately $3.5 billion
by July 31, 2000. During the period, we initiated 61 new investments
and eliminated holdings in 29 securities. The Fund ended the period
with net assets of $89 million and cash reserves of 9.3%. We
anticipate reducing cash reserves in the weeks ahead, as proceeds
from our large cap stock sales are gradually reinvested into
suitable mid cap opportunities. In keeping with our value-oriented
investment process, we generally avoid chasing stocks on price
strength.
During the period, we increased Fund investments in the consumer
staples sector with the addition of several new holdings in food
services, publishing and distribution stocks. We also increased the
Fund's exposure to the consumer cyclicals sector with the addition
of educational services stocks, business services stocks and
customer relationship management companies. Consumer stocks
currently are generally out of favor with investors because of
concerns that consumer spending will slow significantly in the
second half of the year as a result of recent interest rate
increases by the Federal Reserve Board. We believe consumer stocks
already discount much of the risk of an economic slowdown and that
they provide an attractive risk/return profile from current levels.
We also initiated several new technology positions during the
period. The abrupt decline in technology stocks earlier this year
provided an attractive entry point for new mid cap technology
investments. Specifically, we moved to eliminate certain large cap
technology holdings and reinvested the proceeds in mid cap software
providers, technology distribution stocks, data processing and
computer services stocks.
During the period, we de-emphasized investments in the energy, basic
materials and communication services sectors. Several large cap
holdings including Exxon Mobil Corporation, BP Amoco PLC, The Boeing
Company and E.I. duPont de Nemours were eliminated, and the proceeds
were invested in other areas. The relative outperformance of "old
economy" stocks in April and May provided an attractive exit point,
while at the same time many "new economy" stocks traded sharply
lower providing what we believe to be an attractive entry point for
new investment.
Overall, we increased the level of portfolio diversification during
the six-month period. On July 31, 2000, Merrill Lynch Mid Cap Value
Fund's ten largest investment positions represented approximately
22% of Fund assets, and the number of individual stock positions was
expanded to 93 from 60 positions held at the end of the previous
period. We believe that increasing the number of investment
positions could reduce the level of portfolio risk during periods of
market volatility.
Relative to the S&P MidCap 400 Index, the portfolio is overweighted
in the financial services, consumer staples and consumer cyclicals
sectors, and underweighted in the utilities, healthcare and
communication services sectors. Merrill Lynch Mid Cap Value Fund's
sector weightings are derived from our value-oriented investment
process that emphasizes stocks trading at the low end of their
historical valuation ranges. Communication services stocks have
performed extremely well during the past 12 months and few of these
issues currently satisfy our valuation requirements. Financial
services and consumer-related stocks, by contrast, have lagged the
S&P MidCap 400 Index during the past year, and we believe current
low valuation levels provide attractive new investment
opportunities.
Leading stocks that made a positive contribution to Fund investment
results included St. Jude Medical, Inc. and Ace Limited. Shares of
St. Jude Medical, Inc., a manufacturer of cardiac medical devices,
appreciated sharply on improved earnings and favorable prospects for
the company's new cardiac defibrillator pending approval by the Food
and Drug Administration. Shares of Ace Limited also appreciated
significantly during the six-month period. Ace Limited is a holding
company for Ace Group of Companies providing property casualty
insurance, specialty and reinsurance. Recent operating results
showed signs of improved pricing for property casualty insurance and
underwriting results surpassed the range of analysts' estimates.
Merrill Lynch Mid Cap Value Fund's investment results for the period
were hindered by our investment in Office Depot, Inc. Shares of the
office superstore traded sharply lower following the announcement of
June quarter earnings. The retailer experienced unexpected weakness
in technology sales and recently-opened stores failed to meet
targeted levels of growth in same store sales. Office Depot, Inc.
operates a chain of office product warehouse stores in the United
States and provides mail order products through its Viking Office
Products subsidiary. We added to the Fund's position on stock price
weakness, as we anticipate possible improved results in the coming
year as the company curtails expansion in favor of reaching
profitability targets.
Looking ahead, the S&P MidCap 400 Index is currently just below its
closing high achieved on July 17, 2000. However, stock valuations
appear to be more attractive in the mid cap segment when compared to
the NASDAQ 100 Index or the S&P 500 Index. Earnings growth
expectations currently favor mid-capitalization stocks over large-
capitalization stocks, yet valuations based on price-to-book value,
price-to-sales and price-to-earnings ratios appear to be below the
large cap averages.
In Conclusion
We thank you for your investment in Merrill Lynch Mid Cap Value
Fund, and we look forward to reviewing our outlook and strategy with
you again in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(R. Elise Baum)
R. Elise Baum
Senior Vice President and
Portfolio Manager
September 6, 2000
We are pleased to announce that Elise Baum is responsible for the
day-to-day management of Merrill Lynch Mid Cap Value Fund. Ms. Baum
was Vice President of Merrill Lynch Investment Managers, L.P. from
1995 to 1997 and a Director from 1997 to 1999. She has been First
Vice President since 1999.
Merrill Lynch Mid Cap Value Fund, July 31, 2000
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the ex-dividend date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent
Performance
Results*
<CAPTION>
6 Month 12 Month Since Inception
As of July 31, 2000 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Mid Cap Value Fund Class A Shares +5.53% -2.11% +103.53%
ML Mid Cap Value Fund Class B Shares +4.92 -3.22 + 91.73
ML Mid Cap Value Fund Class C Shares +5.02 -3.21 + 91.70
ML Mid Cap Value Fund Class D Shares +5.39 -2.36 +100.89
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on theex-dividend date. The
Fund's inception date is 2/01/95.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 6/30/00 - 5.55% -10.51%
Five Years Ended 6/30/00 +12.21 +11.01
Inception (2/01/95) through 6/30/00 +13.73 +12.60
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 6/30/00 - 6.55% -10.19%
Five Years Ended 6/30/00 +11.01 +11.01
Inception (2/01/95) through 6/30/00 +12.51 +12.51
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 6/30/00 - 6.62% - 7.52%
Five Years Ended 6/30/00 +10.98 +10.98
Inception (2/01/95) through 6/30/00 +12.48 +12.48
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
One Year Ended 6/30/00 - 5.79% -10.74%
Five Years Ended 6/30/00 +11.96 +10.76
Inception (2/01/95) through 6/30/00 +13.46 +12.33
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Mid Cap Value Fund, July 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
NORTH Shares Percent of
AMERICA Industries Held Investments Value Net Assets
<S> <S> <C> <S> <C> <C>
Canada Healthcare 15,800 ++Biovail Corporation $ 916,400 1.0%
Technology 19,800 ++Cognos, Inc. 774,675 0.9
Total Investments in Canada 1,691,075 1.9
United States Basic Materials 24,000 Boise Cascade Corporation 663,000 0.7
51,800 Hercules Incorporated 773,763 0.9
7,694 International Paper Company 261,596 0.3
30,000 Newmont Mining Corporation 532,500 0.6
------------ ------
2,230,859 2.5
Capital Goods 200 ++Avici Systems Inc. 19,825 0.0
600 ++Blue Martini Software, Inc. 35,662 0.0
900 ++Corvis Corporation 74,081 0.1
40,000 Crown Cork & Seal Company, Inc. 557,500 0.6
21,600 Deere & Company 832,950 0.9
11,000 Eaton Corporation 745,937 0.8
24,300 ITT Industries, Inc. 798,863 0.9
54,000 Lockheed Martin Corporation 1,518,750 1.7
200 ++Mainspring, Inc. 3,025 0.0
20,700 Northrop Grumman Corporation 1,470,994 1.7
400 ++SpeechWorks International Inc. 8,000 0.0
30,000 Thomas & Betts Corporation 585,000 0.7
1,100 ++TyCom, Ltd. 37,469 0.1
------------ ------
6,688,056 7.5
Communication 17,500 AT&T Corp. 541,406 0.6
Services 1,300 ++Airspan Networks Inc. 29,006 0.0
------------ ------
570,412 0.6
Consumer Cyclicals 127,500 ++Cendant Corporation 1,633,594 1.8
30,000 Centex Corporation 718,125 0.8
25,900 ++Convergys Corporation 1,167,119 1.3
65,700 Delphi Automotive Systems Corporation 973,181 1.1
25,000 ++Federated Department Stores, Inc. 601,562 0.7
42,900 Harte-Hanks, Inc. 1,085,906 1.2
21,300 Knight Ridder, Inc. 1,110,263 1.3
38,000 ++Lear Corporation 885,875 1.0
321,400 ++Office Depot, Inc. 2,008,750 2.3
300 ++StorageNetworks, Inc. 32,719 0.0
54,700 The TJX Companies, Inc. 916,225 1.0
36,500 ++Tech Data Corporation 1,624,250 1.8
14,200 ++West TeleServices Corporation 335,475 0.4
------------ ------
13,093,044 14.7
Consumer Staples 38,300 ++AmeriSource Health Corporation (Class A) 1,338,106 1.5
8,900 Cardinal Health, Inc. 654,150 0.7
90,000 ++Caremark Rx, Inc. 759,375 0.9
35,700 Deluxe Corporation 767,550 0.9
19,200 General Mills, Inc. 660,000 0.7
52,800 McKesson HBOC, Inc. 1,283,700 1.4
27,700 ++Suiza Foods Corporation 1,284,588 1.5
48,000 ++Valassis Communications, Inc. 1,614,000 1.8
------------ ------
8,361,469 9.4
Energy 32,800 Burlington Resources Inc. 1,070,100 1.2
37,600 Diamond Offshore Drilling, Inc. 1,412,350 1.6
36,400 Noble Affiliates, Inc. 1,092,000 1.2
44,500 Sunoco, Inc. 1,084,688 1.2
41,400 Unocal Corporation 1,252,350 1.4
------------ ------
5,911,488 6.6
Financial Services 73,000 Charter One Financial, Inc. 1,574,062 1.8
Financials 56,800 Ace Limited 2,044,800 2.3
131,500 Banknorth Group, Inc. 2,005,375 2.2
67,000 The CIT Group, Inc (Class A) 1,239,500 1.4
15,000 The Chase Manhattan Corporation 745,312 0.8
23,000 The Chubb Corporation 1,702,000 1.9
25,000 Crescent Real Estate Equities Company 551,563 0.6
49,300 Equity Office Properties Trust 1,503,650 1.7
23,000 Simon Property Group, Inc. 600,875 0.7
36,000 Summit Bancorp. 884,250 1.0
------------ ------
11,277,325 12.6
Healthcare 23,400 Becton, Dickinson and Company 590,850 0.7
28,800 Biomet, Inc. 1,287,000 1.5
200 ++deCODE GENETICS, INC. 5,137 0.0
7,100 ++Express Scripts, Inc. (Class A) 455,731 0.5
500 ++Illumina, Inc. 17,375 0.0
53,000 ++Quintiles Transnational Corp. 831,438 0.9
52,800 ++St. Jude Medical, Inc. 2,178,000 2.4
39,750 ++Tenet Healthcare Corporation 1,209,891 1.4
800 ++Transgenomic, Inc. 15,200 0.0
1,400 ++Variagenics, Inc. 28,350 0.0
14,600 ++Vical Incorporated 237,250 0.3
------------ ------
6,856,222 7.7
</TABLE>
Merrill Lynch Mid Cap Value Fund, July 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Investments Value Net Assets
<S> <S> <C> <C> <S> <C>
United States Technology 13,000 ++3Com Corporation $ 175,500 0.2%
(concluded) 48,000 ++ANTEC Corporation 1,815,000 2.0
20,400 ++Cadence Design Systems, Inc. 425,850 0.5
52,000 Compaq Computer Corporation 1,459,250 1.6
47,000 Equifax Inc. 1,110,375 1.3
30,000 ++Legato Systems, Inc. 291,563 0.3
27,100 ++Litton Industries, Inc. 1,339,756 1.5
146,600 ++Network Associates, Inc. 2,803,725 3.2
40,000 ++Novell, Inc. 377,500 0.4
1,200 ++OmniVision Technologies, Inc. 27,300 0.0
19,292 ++Palm, Inc. 752,375 0.9
72,500 ++Parametric Technology Corporation 725,000 0.8
85,600 ++PeopleSoft, Inc. 1,861,800 2.1
54,900 ++Sungard Data Systems Inc. 1,815,131 2.1
300 ++Sunrise Telecom Incorporated 13,950 0.0
700 ++Support.com, Inc. 23,844 0.0
40,800 ++Sybase, Inc. 984,300 1.1
21,400 ++Synopsys, Inc. 695,500 0.8
400 ++Talarian Corporation 5,050 0.0
17,700 Tektronix, Inc. 1,088,550 1.2
1,200 ++Triton Network Systems, Inc. 33,000 0.0
43,600 ++Unisys Corporation 427,825 0.5
600 ++Virage, Inc. 9,638 0.0
------------ ------
18,261,782 20.5
Transportation 61,000 CNF Transportation Inc. 1,551,687 1.7
17,600 Union Pacific Corporation 760,100 0.9
------------ ------
2,311,787 2.6
Utilities 28,600 Cinergy Corp. 743,600 0.8
27,300 El Paso Energy Corporation 1,320,637 1.5
------------ ------
2,064,237 2.3
Total Investments in the United States 79,200,743 88.8
Total Investments in North America
(Cost--$78,533,209) 80,891,818 90.7
Western
Europe
United Kingdom Healthcare 1,400 ++Gemini Genomics PLC (ADR)* 24,325 0.0
Total Investments in the United Kingdom 24,325 0.0
Total Investments in Western Europe
(Cost--$19,600) 24,325 0.0
SHORT-TERM Face
SECURITIES Amount Issue
Commercial $1,000,000 CSW Credit Inc., 6.49% due 8/11/2000 998,197 1.1
Paper** 1,000,000 Gannett Company, 6.49% due 8/22/2000 996,214 1.1
1,905,000 General Electric Capital Corp., 6.64%
due 8/01/2000 1,905,000 2.1
3,000,000 J.P. Morgan Securities Inc., 6.50% due
8/07/2000 2,996,750 3.4
US Government 2,000,000 Federal Home Loan Mortgage Corporation,
Agency 6.39% due 8/22/2000 1,992,545 2.2
Obligations**
Total Investments in Short-Term Securities
(Cost--$8,888,706) 8,888,706 9.9
Total Investments (Cost--$87,441,515) 89,804,849 100.6
Liabilities in Excess of Other Assets (573,805) (0.6)
------------ ------
Net Assets $ 89,231,044 100.0%
============ ======
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
++Non-income producing security.
See Notes to Financial Statements.
</TOTAL
Merrill Lynch Mid Cap Value Fund, July 31, 2000
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of July 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$87,441,515) $ 89,804,849
Cash 368
Receivables:
Securities sold $ 827,916
Dividends 58,258
Capital shares sold 13,670 899,844
--------------
Prepaid registration fees and other assets 38,547
--------------
Total assets 90,743,608
--------------
Liabilities: Payables:
Securities purchased 832,848
Capital shares redeemed 353,587
Distributor 73,687
Investment adviser 50,372 1,310,494
--------------
Accrued expenses and other liabilities 202,070
--------------
Total liabilities 1,512,564
--------------
Net Assets: Net assets $ 89,231,044
==============
Net Assets Class A Shares of Capital Stock, $.10 par value,
Consist of: 6,250,000 shares authorized $ 2,254
Class B Shares of Capital Stock, $.10 par value,
25,000,000 shares authorized 398,671
Class C Shares of Capital Stock, $.10 par value,
6,250,000 shares authorized 217,849
Class D Shares of Capital Stock, $.10 par value,
6,250,000 shares authorized 39,534
Paid-in capital in excess of par 82,037,288
Accumulated investment loss--net (174,706)
Undistributed realized capital gains on investments--net 4,346,820
Unrealized appreciation on investments--net 2,363,334
--------------
Net assets $ 89,231,044
==============
Net Asset Class A--Based on net assets of $312,608 and 22,542
Value: shares outstanding $ 13.87
==============
Class B--Based on net assets of $53,994,347 and 3,986,711
shares outstanding $ 13.54
==============
Class C--Based on net assets of $29,464,032 and 2,178,486
shares outstanding $ 13.53
==============
Class D--Based on net assets of $5,460,057 and 395,339
shares outstanding $ 13.81
==============
See Notes to Financial Statements.
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended July 31, 2000
<S> <S> <C> <C>
Investment Income: Dividends (net of $2,782 foreign withholding tax) $ 813,945
Interest and discount earned 209,230
--------------
Total income 1,023,175
--------------
Expenses: Investment advisory fees $ 298,455
Account maintenance and distribution fees--Class B 278,514
Transfer agent fees--Class B 155,281
Account maintenance and distribution fees--Class C 151,565
Transfer agent fees--Class C 89,898
Accounting services 62,152
Professional fees 45,428
Printing and shareholder reports 45,189
Registration fees 29,446
Custodian fees 14,375
Transfer agent fees--Class D 12,578
Account maintenance fees--Class D 6,870
Directors' fees and expenses 4,117
Transfer agent fees--Class A 734
Pricing fees 182
Other 3,097
--------------
Total expenses 1,197,881
--------------
Investment loss--net (174,706)
--------------
Realized & Realized gain on investments--net 4,346,828
Unrealized Change in unrealized appreciation on investments--net 149,468
Gain on --------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 4,321,590
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Mid Cap Value Fund, July 31, 2000
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the
Months Ended Year Ended
July 31, January 31,
Increase (Decrease) in Net Assets: 2000 2000
<S> <S> <C> <C>
Operations: Investment loss--net $ (174,706) $ (75,875)
Realized gain on investments--net 4,346,828 7,447,403
Change in unrealized appreciation on investments--net 149,468 (6,126,754)
-------------- --------------
Net increase in net assets resulting from operations 4,321,590 1,244,774
-------------- --------------
Distributions to Realized gain on investments--net:
Shareholders: Class A (22,147) (10,920)
Class B (3,287,282) (1,768,098)
Class C (1,794,741) (958,596)
Class D (374,332) (182,105)
-------------- --------------
Net decrease in net assets resulting from
distributions to shareholders (5,478,502) (2,919,719)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived
Transactions: from capital share transactions (8,173,114) 33,878
Net Assets: Total decrease in net assets (9,330,026) (1,641,067)
Beginning of period 98,561,070 100,202,137
-------------- --------------
End of period $ 89,231,044 $ 98,561,070
============== ==============
See Notes to Financial Statements.
<CAPTION>
FINANCIAL HIGHLIGHTS
Class A++
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.13 $ 14.18 $ 13.98 $ 13.58 $ 11.67
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .05 .15 .11 .07 (.01)
Realized and unrealized gain on
investments--net .72 .22 1.05 2.22 2.70
-------- -------- -------- -------- --------
Total from investment operations .77 .37 1.16 2.29 2.69
-------- -------- -------- -------- --------
Less distributions from realized gain on
investments--net (1.03) (.42) (.96) (1.89) (.78)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.87 $ 14.13 $ 14.18 $ 13.98 $ 13.58
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.53%+++ 2.57% 8.51% 17.12% 23.20%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.55%* 1.41% 1.45% 1.63% 2.03%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .69%* .98% .75% .48% (.07%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 313 $ 369 $ 359 $ 317 $ 209
Data: ======== ======== ======== ======== ========
Portfolio turnover 74.34% 52.89% 40.10% 68.75% 80.60%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Mid Cap Value Fund, July 31, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
Class B++
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.72 $ 13.92 $ 13.75 $ 13.39 $ 11.55
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.03) (.02) (.05) (.09) (.15)
Realized and unrealized gain on
investments--net .70 .22 1.03 2.19 2.65
-------- -------- -------- -------- --------
Total from investment operations .67 .20 .98 2.10 2.50
-------- -------- -------- -------- --------
Less distributions from realized
gain on investments--net (.85) (.40) (.81) (1.74) (.66)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.54 $ 13.72 $ 13.92 $ 13.75 $ 13.39
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 4.92%+++ 1.45% 7.32% 15.91% 21.79%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.64%* 2.51% 2.55% 2.72% 3.11%
Net Assets: ======== ======== ======== ======== ========
Investment loss--net (.42%)* (.11%) (.35%) (.60%) (1.15%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 53,994 $ 59,736 $ 62,419 $ 48,073 $ 34,828
Data: ======== ======== ======== ======== ========
Portfolio turnover 74.34% 52.89% 40.10% 68.75% 80.60%
======== ======== ======== ======== ========
<CAPTION>
Class C++
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.70 $ 13.91 $ 13.75 $ 13.39 $ 11.55
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.03) (.02) (.06) (.09) (.15)
Realized and unrealized gain on
investments--net .71 .21 1.03 2.19 2.66
-------- -------- -------- -------- --------
Total from investment operations .68 .19 .97 2.10 2.51
-------- -------- -------- -------- --------
Less distributions from realized
gain on investments--net (.85) (.40) (.81) (1.74) (.67)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.53 $ 13.70 $ 13.91 $ 13.75 $ 13.39
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.02%+++ 1.38% 7.23% 15.93% 21.82%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.68%* 2.55% 2.58% 2.75% 3.15%
Net Assets: ======== ======== ======== ======== ========
Investment loss--net (.46%)* (.15%) (.39%) (.63%) (1.19%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 29,464 $ 32,543 $ 31,188 $ 22,896 $ 15,022
Data: ======== ======== ======== ======== ========
Portfolio turnover 74.34% 52.89% 40.10% 68.75% 80.60%
======== ======== ======== ======== ========
Class D++
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2000 2000 1999 1998 1997
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 14.05 $ 14.13 $ 13.94 $ 13.54 $ 11.65
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .03 .11 .07 .03 (.04)
Realized and unrealized gain on
investments--net .72 .22 1.04 2.22 2.68
-------- -------- -------- -------- --------
Total from investment operations .75 .33 1.11 2.25 2.64
-------- -------- -------- -------- --------
Less distributions from realized
gain on investments--net (.99) (.41) (.92) (1.85) (.75)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.81 $ 14.05 $ 14.13 $ 13.94 $ 13.54
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 5.39%+++ 2.35% 8.19% 16.89% 22.82%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.80%* 1.67% 1.70% 1.89% 2.27%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net .42%* .73% .50% .23% (.31%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 5,460 $ 5,913 $ 6,236 $ 5,314 $ 4,180
Data: ======== ======== ======== ======== ========
Portfolio turnover 74.34% 52.89% 40.10% 68.75% 80.60%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Mid Cap Value Fund, July 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Mid Cap Value Fund (the "Fund") (formerly Fundamental
Value Portfolio) is part of The Asset Program, Inc. (the "Program")
(formerly Merrill Lynch Asset Builder Program, Inc.), which is
registered under the Investment Company Act as an open-end
management investment company. The Fund is classified as
diversified. The Fund's 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. The Fund
offers four classes of shares under the Merrill Lynch Select Pricing
SM System. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C 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 B, Class C and Class D
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. The following is
a summary of significant accounting policies followed by the Fund.
(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 traded in the over-the-
counter market are valued at the last available bid price 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 futures contracts and related options, are
stated at market value. Securities and assets for which market value
quotations are not available are valued at their fair value as
determined in good faith by or under the direction of the Program's
Board of Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio 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 Fund 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 Fund
deposits and maintains as collateral such initial margin as required
by the exchange on which the transaction is effected. Pursuant to
the contract, the Fund agrees 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 Fund as unrealized gains or losses. When the
contract is closed, the Fund records 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 Fund is authorized to write and purchase call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current 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 Fund enters into a closing transaction), the Fund
realizes 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.
* Foreign currency options and futures--The 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.
* Forward foreign exchange contracts--The 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.
(c) 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.
(d) Income taxes--It is the 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.
(e) 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-
ividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has 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.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Program has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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.
MLIM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at the annual rate of .65% of
the average net assets of the Fund.
Pursuant to the Distribution Plans adopted by the Program in
accordance with Rule 12b-1 under the Investment Company Act of 1940,
the 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 Distribution
Maintenance Fee Fee
Class B .25% .75%
Class C .25% .75%
Class D .25% --
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 Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D 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 the
Fund's Class A and Class D Shares as follows:
FAMD MLPF&S
Class A $ 2 $ 49
Class D $216 $4,167
For the six months ended July 31, 2000, MLPF&S received contingent
deferred sales charges of $76,928 and $9,512 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $10,627 in commissions on the execution
of portfolio security transactions for the 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.
Accounting services are provided to the Fund by MLIM at cost.
Certain officers and/or directors of the Program are officers and/or
directors of MLIM, FDS, PSI, FAMD, and/or ML & Co.
Merrill Lynch Mid Cap Value Fund, July 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended July 31, 2000 were $64,579,002 and
$86,027,032, respectively.
Net realized gains (losses) for the six months ended July 31, 2000
and net unrealized gains as of July 31, 2000 were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 4,346,830 $ 2,363,334
Short-term investments (2) --
------------ -------------
Total $ 4,346,828 $ 2,363,334
============ =============
As of July 31, 2000, net unrealized appreciation for Federal income
tax purposes aggregated $2,363,334, of which $9,409,992 related to
appreciated securities and $7,046,658 related to depreciated
securities. At July 31, 2000, the aggregate cost of investments for
Federal income tax purposes was $87,441,515.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $(8,173,114) and $33,878 for the six months ended
July 31, 2000 and for the year ended January 31, 2000, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 2,572 $ 36,958
Shares issued to shareholders in
reinvestment of distributions 1,184 16,292
------------ -------------
Total issued 3,756 53,250
Shares redeemed (7,355) (103,320)
------------ -------------
Net decrease (3,599) $ (50,070)
============ =============
Class A Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 7,078 $ 106,246
Shares issued to shareholders in
reinvestment of distributions 562 7,965
------------ -------------
Total issued 7,640 114,211
Shares redeemed (6,816) (102,302)
------------ -------------
Net increase 824 $ 11,909
============ =============
Class B Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 225,526 $ 3,110,869
Shares issued to shareholders in
reinvestment of distributions 210,203 2,825,131
------------ -------------
Total issued 435,729 5,936,000
Automatic conversion of shares (23,604) (326,818)
Shares redeemed (780,648) (10,678,508)
------------ -------------
Net decrease (368,523) $ (5,069,326)
============ =============
Class B Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 903,654 $ 13,258,587
Shares issued to shareholders in
reinvestment of distributions 111,133 1,532,514
------------ -------------
Total issued 1,014,787 14,791,101
Automatic conversion of shares (41,813) (620,093)
Shares redeemed (1,102,702) (15,955,798)
------------ -------------
Net decrease (129,728) $ (1,784,790)
============ =============
Class C Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 194,614 $ 2,680,157
Shares issued to shareholders in
reinvestment of distributions 110,972 1,489,237
------------ -------------
Total issued 305,586 4,169,394
Shares redeemed (502,073) (6,870,187)
------------ -------------
Net decrease (196,487) $ (2,700,793)
============ =============
Class C Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 721,120 $ 10,625,675
Shares issued to shareholders in
reinvestment of distributions 58,269 802,949
------------ -------------
Total issued 779,389 11,428,624
Shares redeemed (646,591) (9,362,136)
------------ -------------
Net increase 132,798 $ 2,066,488
============ =============
Class D Shares for the Six Months Dollar
Ended July 31, 2000 Shares Amount
Shares sold 13,311 $ 190,859
Automatic conversion of shares 23,037 326,818
Shares issued to shareholders in
reinvestment of distributions 23,590 323,183
------------ -------------
Total issued 59,938 840,860
Shares redeemed (85,545) (1,193,785)
------------ -------------
Net decrease (25,607) $ (352,925)
============ =============
Class D Shares for the Year Dollar
Ended January 31, 2000 Shares Amount
Shares sold 55,222 $ 831,504
Automatic conversion of shares 41,015 620,093
Shares issued to shareholders in
reinvestment of distributions 11,062 156,096
------------ -------------
Total issued 107,299 1,607,693
Shares redeemed (127,563) (1,867,422)
------------ -------------
Net decrease (20,264) $ (259,729)
============ =============
5. Short-Term Borrowings:
On December 3, 1999, the Fund, along with certain other funds
managed by MLIM and its affiliates, entered into a one-year,
unsecured $1,000,000,000 credit arrangement 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 Fund did not
borrow from the facility during the six months ended July 31, 2000.
