MERRILL LYNCH
ASSET GROWTH
FUND, INC.
FUND LOGO
Annual Report
August 31, 1995
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.
<PAGE>
Merrill Lynch
Asset Growth
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH ASSET GROWTH FUND, INC.
Worldwide
Investments as of
August 31, 1995
Percent Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States 37.4%
Japan 22.0
United Kingdom 4.1
Hong Kong 4.0
Germany 2.5
Switzerland 2.3
Mexico 2.3
France 2.2
Canada 2.2
Malaysia 1.9
Australia 1.8
Italy 1.7
Argentina 1.6
Chile 1.3
Sweden 1.2
<PAGE>
Netherlands 1.1
Singapore 1.0
Spain 1.0
Norway 0.9
Indonesia 0.9
Thailand 0.8
Philippines 0.8
[FN]
++Percent of net assets may not total 100%.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 6.6%
Petroleum 6.1
Capital Goods 5.7
Chemicals 4.6
Electrical Equipment 4.5
Electronics 3.6
Banking 3.4
Building & Construction 3.3
Cement 2.9
Multi-Industry 2.7
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
Eastman Chemical Co. United States 1.4%
The Stanley Works Co. United States 1.4
AT&T Corp. United States 1.4
Banco O'Higgins S.A. (ADR) Chile 1.3
BBC Brown Boveri & Cie (Bearer) Switzerland 1.3
Siemens AG Germany 1.3
Ford Motor Co. United States 1.3
Phillips Petroleum Company United States 1.2
Okumura Corp. Japan 1.2
Mannesmann AG Germany 1.2
<PAGE>
DEAR SHAREHOLDER
Fiscal Year in Review
During the first year of Merrill Lynch Asset Growth Fund, Inc.'s
operation, the first six months were negatively impacted by weakness
among our emerging market equity positions, especially in the
December--February period following the devaluation of the Mexican
peso. In subsequent months, the Fund's Asian and Latin American
positions partially recovered earlier weakness. Our commitment to
Japanese equities also negatively impacted the Fund's performance
until June 30, 1995, when a significant rebound in Japanese stock
prices began.
However, US equities had a positive influence on the Fund's total
return, reflecting the substantial rally which began at the end of
November 1994. Our position in high-yield US bonds also proved
rewarding, with price appreciation supplementing high current
yields for the overall commitment. While performance in European
equities was less uniform, the majority of the positions positively
affected performance.
Portfolio Matters
As of August 31, 1995, the Fund's asset allocation was: foreign
stocks, 58% of net assets; US stocks, 22%; US bonds, 15%; and
cash and cash equivalents, 5%. Our commitment to US equities
remained significant, although the allocation was modestly
reduced through the sale of Archer-Daniels-Midland Co. and
United Technologies Corp.
While the elevated level of the US stock market leads us to be
cautious regarding the near-term outlook, the expectations for a
slow but steady economic growth rate and a low inflation rate should
lead to further gains over the intermediate term and long term. The
favorable US inflation outlook should result in further appreciation
in the US bond market.
However, we foresee superior relative performance by Japanese
equities in upcoming months because data show that more aggressive
monetary and fiscal measures are being used to induce a Japanese
economic recovery. Therefore, we maintain a modestly overweighted
position in Japanese equities, which are currently the largest
single portfolio commitment. We expect the additional recovery in
Japanese equities to be accompanied by further weakness in the
Japanese yen relative to the US dollar. On this basis, we continue
to hedge currency exposure by selling forward versus the US dollar
to the equivalent cash value of 57% of the value of the Japanese
equity positions.
We also look for a further rebound in the emerging markets of Latin
America and Asia. In Latin America, confidence in Mexico should
continue to recover following the stabilization of the
financial situation and an aggressive stimulus package by the
Mexican government. In addition, we expect Argentina to reap the
benefits of avoiding devaluation.
<PAGE>
Asian markets should enjoy increased foreign investment in
recognition of attractive valuations.
We reduced the Fund's position in European equities during the three
months ended August 31, 1995. Positions sold included Hanson PLC,
Alcatel Alsthom, Imperial Chemical Industries PLC, Schlumberger
Ltd., Preussag AG, and Sulzer Gebrueder AG. This reduction reflects
our neutral posture on European equity markets. Emphasis in the
European markets is placed on the shares of companies demon-strating
exceptional progress in restructuring, much in the man-ner of US
companies during recent years.
In Conclusion
We thank you for your investment in Merrill Lynch Asset Growth Fund,
Inc., and we look forward to reviewing our outlook and strategy with
you in our upcoming quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Joel Heymsfeld)
Joel Heymsfeld
Vice President and
Portfolio Manager
September 30, 1995
<PAGE>
Officers and
Directors
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Richard L. Reller, Senior Vice President
Donald C. Burke, Vice President
Joel Heymsfeld, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Chase Manhattan Bank, N.A.
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800)637-3863
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been 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.
<PAGE>
* 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.
* 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).
Performance data for all of the Fund's shares are presented in the
"Total Return Based on a $10,000 Investment" graphs below, the
"Aggregate Total Return" tables on page 5 and the "Recent
Performance Results" table also on page 5. The "Recent Performance
Results" table shows investment results before the deduction of any
sales charges for the Fund's shares for the since inception periods
and 3-month period ended August 31, 1995. All data in this table
assume imposition of the actual total expenses incurred by each
class of shares during the relevant period.
None of the past results shown should 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. 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.
Total Return Based on a $10,000 Investment--Class A Shares* and Class B Shares*
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class B Shares compared to growth of an investment in the Composite Index
and MSCI World Stock Index. Beginning and ending values are:
9/02/94** 9/95
ML Asset Growth Fund--
Class A Shares++ $ 9,600 $ 9,419
ML Asset Growth Fund--
Class B Shares++ $10,000 $ 9,446
<PAGE>
Composite Index++++ $10,000 $10,928
MSCI World Stock Index++++++ $10,000 $10,824
Total Return Based on a $10,000 Investment--Class C Shares* and Class D Shares*
A line graph depicting the growth of an investment in the Fund's Class C Shares
and Class D Shares compared to growth of an investment in the Composite Index
and MSCI World Stock Index. Beginning and ending values are:
10/21/94** 9/95
ML Asset Growth Fund--
Class C Shares++ $10,000 $ 9,895
ML Asset Growth Fund--
Class D Shares++ $ 9,600 $ 9,531
Composite Index++++ $10,000 $10,855
MSCI World Stock Index++++++ $10,000 $10,813
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses including advisory fees.
**Commencement of Operations.
++ML Asset Growth Fund, Inc. invests in a portfolio of US and foreign
equity, debt and money market securities.
++++This unmanaged Index, which is an equally weighted blend of the Morgan
Stanley Capital International World Index, the Salomon Brothers World
Government Bond Index, and the Salomon Brothers World Money Market Index,
is comprised of a representative sampling of stocks of large-, medium-,
and small-capitalization companies in 22 countries, government bonds
and money market securities in the major markets, including the
United States.
++++++This unmanaged market capitalization-weighted Index is comprised of a
representative sampling of stocks of large-, medium-, and small-
capitalization companies in 22 countries, including the United States.
<PAGE>
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (9/02/94)
through 6/30/95 -4.11% -9.14%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (9/02/94)
through 6/30/95 -4.91% -8.71%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 6/30/95 -3.41% -4.38%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 6/30/95 -2.88% -7.97%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
Since Inception 3 Month
8/31/95 5/31/95 Inception++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $9.90 $9.55 $10.00 -1.00% +3.66%
Class B Shares 9.83 9.51 10.00 -1.70 +3.36
Class C Shares 9.82 9.50 9.85 -0.30 +3.37
Class D Shares 9.88 9.55 9.86 +0.20 +3.46
Class A Shares-Total Return -0.59(1) +3.66
Class B Shares-Total Return -1.60(2) +3.36
Class C Shares-Total Return -0.05(3) +3.37
Class D Shares-Total Return +0.59(4) +3.46
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Class A and Class B Shares commenced operations on 9/02/94. Class
C and Class D Shares commenced operations on 10/21/94.
(1)Percent change includes reinvestment of $0.038 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.009 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.023 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.036 per share ordinary
income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Banking 5,500 Banco Frances del Rio de la Plata
S.A.(ADR) (a) $ 170,444 $ 110,688 0.7%
Petroleum 8,000 Yacimientos Petroliferos Fiscales
S.A. (Sponsored) (ADR) (a) 186,139 141,000 0.9
Total Common Stocks in Argentina 356,583 251,688 1.6
Australia Multi-Industry 50,000 CSR Ltd. 170,559 176,720 1.1
50,000 Pacific Dunlop Ltd. 151,296 118,064 0.7
Total Common Stocks in Australia 321,855 294,784 1.8
Canada Natural Resources 9,500 Canadian Pacific Ltd. 169,195 160,313 1.0
Telecommunications 5,000 Northern Telecommunications Ltd. 174,050 183,750 1.2
Total Common Stocks in Canada 343,245 344,063 2.2
Chile Banking 9,000 Banco O'Higgins S.A. (ADR) (a) 183,915 212,625 1.3
Total Common Stocks in Chile 183,915 212,625 1.3
France Building & 1,400 ++Compagnie de Saint Gobain 168,830 177,950 1.1
Construction
Petroleum 3,000 TOTAL S.A. (Class B) 178,190 176,324 1.1
Total Common Stocks in France 347,020 354,274 2.2
Germany Electronics 400 Siemens AG 177,405 203,955 1.3
Machinery & Equipment 600 Mannesmann AG 167,773 189,500 1.2
Total Common Stocks in Germany 345,178 393,455 2.5
<PAGE>
Hong Kong Chemicals 500,000 Shanghai Petrochemical Co., Ltd. 167,118 163,103 1.1
Multi-Industry 20,000 Swire Pacific Ltd. 'A' 169,462 149,861 0.9
Real Estate 22,000 Sun Hung Kai Properties, Ltd. 168,928 159,873 1.0
Utilities-- 32,000 China Light & Power Co., Ltd. 167,608 157,096 1.0
Electric
Total Common Stocks in Hong Kong 673,116 629,933 4.0
Indonesia Telecommunications 4,190 P.T. Indonesian Satellite
(ADR) (a) 162,969 147,174 0.9
Total Common Stocks in Indonesia 162,969 147,174 0.9
Italy Cement 45,000 Italcementi S.p.A. 183,136 148,154 0.9
Telecommunications 40,000 Societa Finanziara Telefonica
S.p.A. (STET) 121,375 122,585 0.8
Total Common Stocks in Italy 304,511 270,739 1.7
Japan Banking 5,000 Mitsubishi Trust & Banking Corp. 90,460 83,461 0.5
7,000 Sanwa Bank, Ltd. 141,979 134,050 0.9
----------- ----------- ------
232,439 217,511 1.4
Building & 15,000 Maeda Corp. 167,593 161,290 1.0
Construction 20,000 Okumura Corp. 171,072 192,524 1.2
----------- ----------- ------
338,665 353,814 2.2
Building Materials 14,000 Asahi Glass Co., Ltd. 172,319 159,140 1.0
Capital Goods 20,000 Hitachi Cable Ltd. 172,962 149,514 0.9
20,000 Mitsubishi Heavy Industries, Ltd. 161,560 143,164 0.9
----------- ----------- ------
334,522 292,678 1.8
Chemicals 12,000 Sekisui Chemical Co., Ltd. 149,020 151,152 1.0
Consumer-- 10,000 Matsushita Electric Industrial
Electronics Co., Ltd. 168,023 156,682 1.0
Electrical Equipment 10,000 Makita Corp. 151,915 160,778 1.0
24,000 Mitsubishi Electric Co. 165,781 180,154 l.1
----------- ----------- ------
317,696 340,932 2.1
Electronics 2,000 Kyocera Corp. 158,278 176,959 1.1
3,000 Rohm Co. 128,833 185,253 1.2
----------- ----------- ------
287,111 362,212 2.3
<PAGE>
Insurance 20,000 Nippon Fire & Marine Insurance
Co., Ltd. 150,777 115,719 0.7
14,000 Tokio Marine & Fire Insurance
Co., Ltd. 168,933 166,308 1.1
----------- ----------- ------
319,710 282,027 1.8
Machinery 18,000 Komatsu Ltd. 168,239 148,756 0.9
20,000 ++Makino Milling Machine Co. 177,637 149,514 0.9
----------- ----------- ------
345,876 298,270 1.8
Petroleum 23,000 Nippon Oil Co., Ltd. 170,284 130,251 0.8
Photography 9,000 Canon, Inc. 156,955 163,134 1.0
Printing & 9,000 Dai Nippon Printing Co., Ltd. 167,255 142,857 0.9
Publishing
Retail Stores 3,000 Ito-Yokado Co., Ltd. 160,796 160,061 1.0
Trading 15,000 Kamigumi Co., Ltd. 174,860 139,478 0.9
17,000 Sumitomo Corp. 171,167 159,119 1.0
----------- ----------- ------
346,027 298,597 1.9
Total Common Stocks in Japan 3,666,698 3,509,318 22.0
Malaysia Automotive & 50,000 UMW Holdings BHD 130,852 164,362 1.0
Equipment
Building Materials 25,000 Hong Leong Industries BHD 134,398 134,295 0.9
Total Common Stocks in Malaysia 265,250 298,657 1.9
Mexico Cement 34,000 Cementos Mexicanos, S.A. de C.V.
(Class B) (Cemex) 224,841 156,194 1.0
Retail Stores 60,000 Cifra, S.A. de C.V. 'C' 164,781 71,656 0.4
Telecommunications 11,400 Empresas ICA Sociedad Controladora,
S.A. de C.V. (ADR) (a) 222,744 136,800 0.9
Total Common Stocks in Mexico 612,366 364,650 2.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Netherlands Petroleum 1,500 Royal Dutch Petroleum N.V.
(ADR) (a) $ 162,683 $ 178,875 1.1%
Total Common Stocks in
the Netherlands 162,683 178,875 1.1
Norway Ship Building 4,000 Kvaerner A.S. (Class B) 175,700 148,564 0.9
Total Common Stocks in Norway 175,700 148,564 0.9
Philippines Telecommunications 2,000 Philippine Long Distance
Telephone Co. (ADR) (a) 139,932 125,750 0.8
Total Common Stocks in
the Philippines 139,932 125,750 0.8
Singapore Ship Repair 4,000 Jurong Shipyard Ltd. 38,227 27,887 0.2
Shipping 110,000 Neptune Orient Lines Ltd. 170,752 134,014 0.8
Total Common Stocks in
Singapore 208,979 161,901 1.0
Spain Petroleum 5,000 Repsol S.A. (ADR) (a) 160,925 158,125 1.0
Total Common Stocks in Spain 160,925 158,125 1.0
Sweden Capital Goods 9,000 SKF AB 'B' Free 160,889 182,696 1.2
Total Common Stocks in
Sweden 160,889 182,696 1.2
<PAGE>
Switzerland Cement 200 Holderbank Financiere Glarus
AG (Bearer) 147,046 157,107 1.0
1,000 Holderbank Financiere Glarus AG
(Warrants) (b) 0 1,247 0.0
----------- ----------- ------
147,046 158,354 1.0
Electrical Equipment 200 BBC Brown Boveri & Cie (Bearer) 181,431 211,305 1.3
Total Common Stocks in
Switzerland 328,477 369,659 2.3
Thailand Real Estate 60,000 MDX Company Ltd. 246,175 131,737 0.8
Total Common Stocks in Thailand 246,175 131,737 0.8
United Auto Equipment 55,000 Lucas Industries PLC (Ordinary) 171,851 157,774 1.0
Kingdom
Beverages 6,200 Grand Metropolitan PLC (ADR) (a) 170,432 158,875 1.0
Electrical Equipment 37,000 General Electric Co. PLC
(Ordinary) 167,508 179,718 1.1
Utilities--Gas 3,600 British Gas PLC (ADR) (a) 165,852 155,250 1.0
Total Common Stocks in
the United Kingdom 675,643 651,617 4.1
United Automobiles 6,500 Ford Motor Co. 174,625 199,063 1.3
States
Capital Goods 4,000 General Signal Corp. 142,222 142,000 0.9
8,200 Keystone International, Inc. 156,130 165,025 1.0
4,000 Stewart & Stevenson Services,
Inc. 141,594 127,500 0.8
----------- ----------- ------
439,946 434,525 2.7
Chemicals 3,500 Eastman Chemical Co. 183,182 226,187 1.4
5,100 Nalco Chemical Co. 168,231 178,500 1.1
----------- ----------- ------
351,413 404,687 2.5
Commercial--Services 6,100 Kelly Services, Inc. (Class A) 182,125 172,325 1.1
Furniture/ 2,500 Whirlpool Corporation 144,731 136,250 0.9
Home Appliances
Hardware Products 5,000 The Stanley Works Co. 196,655 221,250 1.4
<PAGE>
Hospital Supplies 4,500 Abbott Laboratories 142,020 174,375 1.1
Office-Related 4,000 Pitney Bowes, Inc. 127,564 162,500 1.0
Oil Services 7,000 Dresser Industries, Inc. 140,902 168,000 1.1
Petroleum 6,000 Phillips Petroleum Company 206,370 197,250 1.2
Pharmaceuticals 3,700 Merck & Co., Inc. 126,484 184,537 1.1
Photography 3,100 Eastman Kodak Co. 160,989 178,637 1.1
Pollution Control 11,000 Wheelabrator Technologies Inc. 176,940 171,875 1.1
Scientific Equipment 5,000 Fisher Scientific International,
Inc. 154,457 163,125 1.0
Telecommunications 3,000 Bell Atlantic Corp. 147,930 179,250 1.1
6,000 Comsat Corp. 126,006 139,500 0.9
----------- ----------- ------
273,936 318,750 2.0
Utilities-- 3,900 AT&T Corp. 208,199 220,350 1.4
Communications
Total Common Stocks in
the United States 3,207,356 3,507,499 22.0
Total Investments in
Common Stocks 13,049,465 12,687,783 79.6
Face
Amount Fixed-Income Securities
United Airlines US$ 200,000 USAir Inc., 10.375% due 3/01/2013 178,000 187,000 1.2
States
Broadcast & 200,000 Sinclair Broadcast Group, Inc.,
Publishing 10% due 12/15/2003 187,000 201,000 1.3
Chemicals 325,000 G-I Holdings Inc., 12.27%*
due 10/01/1998 224,446 232,375 1.4
Communications 225,000 Panamsat L.P., 7.8548%*
due 8/01/2003 156,572 175,500 1.1
100,000 Videotron Holdings PLC,
10.625% due 2/15/2005 99,375 104,500 0.7
----------- ----------- ------
255,947 280,000 1.8
<PAGE>
Cosmetics 200,000 Revlon Consumer Products Corp.,
9.375% due 4/01/2001 180,329 196,500 1.2
Energy 200,000 TransTexas Gas Corp., 11.50%
due 6/15/2002 200,000 209,500 1.3
Financial Services 200,000 Reliance Group Holdings, Inc.,
9.75% due 11/15/2003 180,000 194,000 1.2
Hotels & Casinos 200,000 Bally's Park Place Funding Corp.,
9.25% due 3/15/2004 171,750 188,500 1.2
Paper 200,000 Stone Container Corp., 11.50%
due 10/01/2004 198,564 212,500 1.3
Restaurants 200,000 Flagstar Corp., 11.375% due
9/15/2003 176,000 154,000 1.0
Textiles 200,000 WestPoint Stevens, Inc., 9.375%
due 12/15/2005 182,000 193,000 1.2
Utilities-- 200,000 CTC Mansfield Funding Corp.,
Electric 10.25% due 3/30/2003 185,500 200,750 1.3
Total Investments in
Fixed-Income Securities 2,319,536 2,449,125 15.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Value Percent of
COUNTRY Amount Short-Term Securities Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Commercial US$ 193,000 General Electric Capital Corp.,
States Paper** 5.82% due 9/01/1995 $ 193,000 $ 193,000 1.2%
Total Investments in
Short-Term Securities 193,000 193,000 1.2
Total Investments $15,562,001 15,329,908 96.2
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 248,600 1.5
Other Assets Less Liabilities 365,142 2.3
----------- ------
Net Assets $15,943,650 100.0%
=========== ======
<PAGE>
<FN>
*Represents a zero coupon or step bond; the interest rate shown is the
effective yield at the time of purchase.
**Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the Fund.
(a)American Depositary Receipts (ADR).
(b)Warrents entitle the Fund to purchase a predetermined number of shares
of common stock. The purchase price and number of shares are subject
to adjustment under certain conditions until the expiration date.
++Non-income producing security.
++++Forward foreign exchange contracts as of August 31, 1995 were as follows:
Unrealized
Foreign Currency Expiration Appreciation
Sold Date (Note 1c)
YEN 191,672,000 January 1996 $248,600
Total Unrealized Appreciation--Net on
Forward Foreign Exchange Contracts
(US Commitment--$2,250,134) $248,600
========
See Notes to Financial Statements.
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended August 31, 1995
Additions
*HMH Properties, Inc.
Holderbank Financiere Glarus AG(Warrants)
Sanwa Bank, Ltd.
Whirlpool Corporation
<PAGE>
Deletions
Alcatel Alsthom (ADR)
Archer-Daniels-Midland Co.
*HMH Properties, Inc.
Hanson PLC (Sponsored) (ADR)
Imperial Chemical Industries PLC(ADR)
Preussag AG
Schlumberger Ltd.
Sharp Corp.
Sulzer Gebrueder AG
Toray Industries Ltd.
United Technologies Corp.
[FN]
*Added and deleted in the same quarter.
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of August 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$15,562,001) (Note 1a) $15,329,908
Cash 1,986
Unrealized appreciation on forward foreign exchange
contracts (Note 1c) 248,600
Receivables:
Securities sold $ 95,302
Capital shares sold 84,574
Interest 74,628
Investment adviser (Note 2) 63,803
Dividends 29,630 347,937
-----------
Deferred organization expenses (Note 1g) 88,921
Prepaid expenses (Note 1g) 94,572
-----------
Total assets 16,111,924
-----------
Liabilities: Payables:
Capital shares redeemed 101,739
Distributor (Note 2) 11,335 113,074
-----------
Accrued expenses 55,200
-----------
Total liabilities 168,274
-----------
<PAGE>
Net Assets: Net assets $15,943,650
===========
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 16,938
Class B Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 120,383
Class C Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 7,480
Class D Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 17,168
Paid-in capital in excess of par 15,942,976
Undistributed investment income--net 77,313
Accumulated realized capital losses on investments and
foreign currency transactions--net (254,628)
Unrealized appreciation on investments and foreign currency
transactions--net 16,020
-----------
Net assets $15,943,650
===========
Net Asset Value: Class A--Based on net assets of $1,677,069 and 169,379
shares outstanding $ 9.90
===========
Class B--Based on net assets of $11,834,943 and 1,203,832
shares outstanding $ 9.83
===========
Class C--Based on net assets of $734,620 and 74,794
shares outstanding $ 9.82
===========
Class D--Based on net assets of $1,697,018 and 171,679
shares outstanding $ 9.88
===========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period September 2, 1994++ to August 31, 1995
<S> <S> <C> <C>
Investment Interest and discount earned $ 363,992
Income Dividends (net of $25,107 foreign withholding tax) 302,282
(Notes 1e & 1f): -----------
Total income 666,274
-----------
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 135,322
Investment advisory fees (Note 2) 126,499
Printing and shareholder reports 124,574
Registration fees (Note 1g) 117,873
Accounting services (Note 2) 46,081
Professional fees 41,694
Custodian fees 26,269
Transfer agent fees--Class B (Note 2) 25,840
Directors' fees and expenses 25,287
Amortization of organization expenses (Note 1g) 22,230
Pricing fees 5,537
Account maintenance and distribution fees--Class C (Note 2) 5,332
Transfer agent fees--Class A (Note 2) 3,215
Account maintenance fees--Class D (Note 2) 1,895
Transfer agent fees--Class D (Note 2) 1,547
Transfer agent fees--Class C (Note 2) 1,100
Other 6,109
-----------
Total expenses before reimbursements 716,404
Reimbursement of expenses (Note 2) (152,193)
-----------
Total expenses after reimbursement 564,211
-----------
Investment income--net 102,063
-----------
Realized & Realized loss from:
Unrealized Gain Investments--net (1,176)
(Loss) on Foreign currency transactions--net (253,452) (254,628)
Investments & -----------
Foreign Currency Unrealized appreciation (depreciation) on:
Transactions--Net Investments--net (232,093)
(Notes 1c, 1d, Foreign currency transactions--net 248,113 16,020
1f & 3): ----------- -----------
Net realized and unrealized loss on investments and
foreign currency transactions (238,608)
-----------
Net Decrease in Net Assets Resulting from Operations $ (136,545)
===========
<PAGE>
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
September 2, 1994++ to
Increase (Decrease) in Net Assets: August 31, 1995
<S> <S> <C>
Operations: Investment income--net $ 102,063
Realized loss on investments and foreign currency transactions--net (254,628)
Unrealized appreciation on investments and foreign currency
transactions--net 16,020
-----------
Net decrease in net assets resulting from operations (136,545)
-----------
Dividends to Investment income--net:
Shareholders Class A (9,329)
(Note 1h): Class B (13,875)
Class C (1,125)
Class D (421)
-----------
Net decrease in net assets resulting from dividends to shareholders (24,750)
-----------
Capital Share Net increase in net assets derived from capital share transactions 16,004,945
Transactions -----------
(Note 4):
Net Assets: Total increase in net assets 15,843,650
Beginning of period 100,000
-----------
End of period* $15,943,650
===========
<FN>
*Undistributed investment income--net $ 77,313
===========
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios
have been derived from information provided from For the Period For the Period
information provided in the financial statements. September 2, 1994++ October 21, 1994++
to August 31, 1995 to August 31, 1995
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.00 $ 10.00 $ 9.85 $ 9.86
Operating ------- ------- ------- -------
Performance: Investment income--net .16 .05 .04 .10
Realized and unrealized loss on investments
and foreign currency transactions--net (.22) (.21) (.05) (.04)
------- ------- ------- -------
Total from investment operations (.06) (.16) (.01) .06
------- ------- ------- -------
Less dividends from investment income--net (.04) (.01) (.02) (.04)
------- ------- ------- -------
Net asset value, end of period $ 9.90 $ 9.83 $ 9.82 $ 9.88
======= ======= ======= =======
Total Investment Based on net asset value per share (.59%)+++ (1.60%)+++ (.05%)+++ .59%+++
Return:** ======= ======= ======= =======
Ratios to Expenses, excluding account maintenance
Average Net and distribution fees and net of reimbursement 2.47%* 2.50%* 2.51%* 2.50%*
Assets: ======= ======= ======= =======
Expenses, net of reimbursement 2.47%* 3.50%* 3.51%* 2.75%*
======= ======= ======= =======
Expenses 3.31%* 4.37%* 4.58%* 4.32%*
======= ======= ======= =======
Investment income--net 1.46%* .43%* .51%* 1.43%*
======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 1,677 $11,835 $ 735 $ 1,697
Data: ======= ======= ======= =======
Portfolio turnover 42.50% 42.50% 42.50% 42.50%
======= ======= ======= =======
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Asset Growth Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified, open-
end management investment company. Prior to commencement of
operations on September 2, 1994, the Fund had no operations other
than those relating to organizational matters and the sale of 5,000
Class A Shares and 5,000 Class B Shares of common stock to Merrill
Lynch Asset Management, L.P. ("MLAM") for $100,000. 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.
<PAGE>
(a) Valuation of investments--Portfolio securities which 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 which 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 are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. 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 Fund's Board of Directors.
(b) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank of
the Federal Reserve System or a primary dealer in US Government
securities. Under such agreements, the bank or primary dealer 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 additionsto such
securities daily to ensure that the contract is fully
collateralized.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. 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
interest rate 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
* 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. Premium or discount is amortized over the life of the
contracts.
* Options--The Fund is authorized to write covered call options and
purchase 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.
(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 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.
<PAGE>
(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 except that if the exdividend date has passed,
certain dividends from foreign securities are recorded as soon as
the Fund is informed of 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 five-year period beginning with the commencement
of operations. Prepaid registration fees are charged to expense as
the related shares are issued.
(h) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the exdividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
MLAM. The general partner of MLAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner. The Fund has also
entered into a Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLAM 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 of 0.75%, on an annual basis,
of the average daily value of the Fund's net assets. Certain of the
states in which the shares of the Fund are qualified for sale impose
limitations on the expenses of the Fund. The most restrictive annual
expense limitation requires that MLAM reimburse the Fund to the
extent the Fund's expenses (excluding interest, taxes, distribution
fees, brokerage fees and commissions, and extraordinary items)
exceed 2.5% of the Fund's first $30 million of average daily net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the average daily net assets in excess thereof. MLAM's
obligation to reimburse the Fund is limited to the amount of the
management fee. No fee payment will be made to MLAM during any
fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment. For the
period September 2, 1994 to August 31, 1995, MLAM earned fees of
$126,499, all of which was reimbursed pursuant to the expense
limitation. MLAM also reimbursed the Fund for additional expenses of
$25,694.
<PAGE>
Pursuant to the distribution plans ("the Distribution Plans")
adopted by the Fund 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 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("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 period September 2, 1994 to August 31, 1995, MLFD earned
underwriting discounts and MLPF&S earned dealer concessions on sales
of the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $390 $8,528
Class D $456 $8,548
For the period ended August 31, 1995, MLPF&S received contingent
deferred sales charges of $43,463 and $334 relating to transactions
in Class B and Class C Shares, respectively.
In addition, MLPF&S received $8,056 in commissions on the execution
of portfolio security transactions for the Fund for the period ended
August 31, 1995.
During the period September 2, 1994 to August 31, 1995, the Fund
paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$637 for security price quotations to compute the net asset value of
the Fund.
<PAGE>
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, MLPF&S, MLFDS, MLFD, PSI, and/or ML & Co.
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period ended August 31, 1995 were $21,535,629 and
$6,199,484, respectively.
Net realized and unrealized gains (losses) as of August 31, 1995
were as follows:
Realized Unrealized
Losses Gains (Losses)
Long-term investments $ (1,128) $ (232,093)
Short-term investments (48) --
Forward foreign exchange
contracts (250,566) 248,600
Foreign currency transactions (2,886) (487)
----------- ------------
Total $ (254,628) $ 16,020
=========== ============
As of August 31, 1995, net unrealized depreciation for Federal
income tax purposes aggregated $232,093, of which $854,692 related
to appreciated securities and $1,086,785 related to depreciated
securities. At August 31, 1995, the aggregate cost of investments
for Federal income tax purposes was $15,562,001.
4. Capital Share Transactions:
Net increase in net assets derived from capital share
transactions was $16,004,945 for the period ended August
31, 1995.
Transactions in capital shares for each class were as follows:
<PAGE>
Class A Shares for the Period
September 2, 1994++ to Dollar
August 31, 1995 Shares Amount
Shares sold 275,032 $ 2,724,867
Shares issued to shareholders in
reinvestment of dividends 647 6,028
----------- -----------
Total issued 275,679 2,730,895
Shares redeemed (111,300) (1,060,813)
----------- -----------
Net increase 164,379 $ 1,670,082
=========== ===========
[FN]
++Prior to September 2, 1994 (commencement of operations), the Fund
issued 5,000 shares to MLAM for $50,000.
Class B Shares for the Period
September 2, 1994++ to Dollar
August 31, 1995 Shares Amount
Shares sold 1,943,995 $19,092,515
Shares issued to shareholders in
reinvestment of dividends 1,273 11,853
----------- -----------
Total issued 1,945,268 19,104,368
Shares redeemed (739,645) (7,002,581)
Automatic conversion of shares (6,791) (63,907)
----------- -----------
Net increase 1,198,832 $12,037,880
=========== ===========
[FN]
++Prior to September 2, 1994 (commencement of operations), the Fund
issued 5,000 shares to MLAM for $50,000.
Class C Shares for the Period
October 21, 1994++ to Dollar
August 31, 1995 Shares Amount
Shares sold 120,893 $ 1,143,290
Shares issued to shareholders in
reinvestment of dividends 88 814
----------- -----------
Total issued 120,981 1,144,104
Shares redeemed (46,187) (431,343)
----------- -----------
Net increase 74,794 $ 712,761
=========== ===========
<PAGE>
[FN]
++Commencement of Operations.
Class D Shares for the Period
October 21, 1994++ to Dollar
August 31, 1995 Shares Amount
Shares sold 186,141 $ 1,722,943
Automatic conversion of shares 6,773 63,907
Shares issued to shareholders in
reinvestment of dividends 42 393
----------- -----------
Total issued 192,956 1,787,243
Shares redeemed (21,277) (203,021)
----------- -----------
Net increase 171,679 $ 1,584,222
=========== ===========
[FN]
++Commencement of Operations.
5. Commitments:
At August 31, 1995, the Fund entered into foreign exchange contracts
under which it had agreed to sell various foreign currencies with a
value of approximately $89,000.
</AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors,
Merrill Lynch Asset Growth Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Asset Growth Fund, Inc. as of August 31, 1995, the related
statements of operations, changes in net assets and the financial
highlights for the period September 2, 1994 (commencement of
operations) to August 31, 1995. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at August
31, 1995, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Asset Growth Fund, Inc. as of August 31, 1995, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated period in conformity
with generally accepted accounting principles.
Deloitte & Touche, LLP
Princeton, New Jersey
October 6, 1995
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
All of the ordinary income distributions paid by Merrill Lynch Asset
Growth Fund, Inc. during its taxable year ended August 31, 1995,
qualify for the dividends received deduction for corporations.
Additionally, there were no long-term capital gains distributed
during the year.
Please retain this information for your records.
