MERRILL LYNCH
ASSET GROWTH
FUND, INC.
FUND LOGO
Semi-Annual Report
February 28, 1999
Investing in emerging market securities involves a number of risk
factors and special considerations, including restrictions on
foreign investments and on repatriation of capital invested in
emerging markets, currency fluctuations, and potential price
volatility and less liquidity of securities traded in emerging
markets. In addition, there may be less publicly available
information about the issuers of securities, and such issuers may
not be subject to accounting, auditing and financial reporting
standards and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-term
investment for investors capable of assuming the risks of investing
in emerging markets. The Fund should be considered as a vehicle for
diversification and not as a complete investment program. Please
refer to the propectus for details.
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 Asset
Growth Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH ASSET GROWTH FUND, INC.
Worldwide
Investments as of
February 28, 1999
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States 57.8%
United Kingdom 8.9
Japan 7.2
France 4.6
Sweden 3.8
Germany 3.6
Spain 3.0
Finland 2.7
Italy 1.5
Netherlands 1.4
Switzerland 1.1
Canada 0.7
Ireland 0.6
Austria 0.3
New Zealand 0.2
Singapore 0.2
Norway 0.2
South Korea 0.1
Denmark 0.1
------
Total 98.0%
======
[FN]
++Total may not equal 100%.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 8.7%
Banking 4.7
Insurance 4.4
Electronics 3.6
Pharmaceuticals 3.5
Retail-Stores 3.0
Broadcasting/Cable 2.7
Software-Computer 2.0
Computer Services/Software 2.0
Automobiles 2.0
Country Percent
Ten Largest Holdings of of Net
(Equity Investments) Origin Assets
Providian Financial
Corporation US 1.7%
Microsoft Corporation US 1.6
Ameritech Corporation US 1.5
Tele-Communications,
Inc. (Class A) US 1.4
Intel Corporation US 1.4
The Dial Corporation US 1.4
Bristol-Myers Squibb
Company US 1.4
GTE Corporation US 1.4
MCI WorldCom Inc. US 1.3
Tele-Communications
TCI Ventures Group
(Class A) US 1.3
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
DEAR SHAREHOLDER
Investor attitudes shifted markedly during the quarter ended
February 28, 1999. The US economy demonstrated surprising strength
as 1998 drew to a close. As 1999 began, forecasts of a possible
slowdown gave way to increasing expectations that the US economy
could overheat. As a result, US long-term bond yields backed up to
mid-summer 1998 levels as investors increasingly anticipated
monetary policy tightening by the Federal Reserve Board. However,
shortly after the February quarter's close, investor confidence
returned as weaker-than-expected US employment statistics suggested
that inflationary pressures would continue to be contained and that
the central bank would not make major adjustments to its monetary
policy.
As 1999 unfolds, investor focus is likely to remain on the prospects
for the US economy. For the health of the global economy overall,
the ongoing recession in Japan is of great concern. At the same
time, the difficulties in emerging economies such as Russia and
Brazil remain. Progress in easing strains within the global
financial system--combined with continued evidence of non-
inflationary economic growth--would likely provide an important
element of stability to the financial markets.
Portfolio Matters
As of February 28, 1999, the Fund's asset allocation was: US stocks,
56% of net assets; foreign stocks, 37%; US bonds, 2%; foreign bonds,
3%; and cash reserves, 2%.
During the three months ended February 28, 1999, we continued to
shift assets away from fixed-income securities and money market
instruments in favor of common stocks. We increased the Fund's
allocation to US equities from 49% of net assets to 56% during the
February quarter. Technology remained the largest sector represented
among our US equity position, reflecting the continuing high degree
of earnings visibility for the group. New commitments in this area
included Lucent Technologies Inc. Other sectors with significant
representation included healthcare, with newly established positions
in Pfizer Inc. and American Home Products Corporation; consumer
staples, including a new commitment in Philip Morris Companies Inc.;
and finance.
We enlarged our foreign equity representation from 29% of net assets
to 37% during the three months ended February 28, 1999. We
accomplished this largely through the expansion of the Fund's
Japanese equity representation. We are becoming increasingly
optimistic over the upside potential in the Japanese stock market,
given evidence of increasingly accommodative monetary policy, some
progress toward dealing with the financial crisis, and evidence that
a growing number of corporations are undertaking corporate
restructuring. In adding to Japanese equities, we are attempting to
maintain a balance between export-oriented companies, as exemplified
by NEC Corporation and Toyota Motor Corporation, and companies more
dependent on the domestic economy, including commitments in banking.
We have also reestablished a small position in emerging Asian
markets through a position in Samsung Electronics. European equities
remained the largest regional commitment among the foreign equity
holdings with significant positions remaining in telecommunications,
telecommunications equipment, food, healthcare and financials.
Although we reduced our foreign bond commitment, we established
positions in Japan and New Zealand. We took advantage of an increase
in yields in Japanese bonds early in 1999 to initiate a commitment
in these obligations. The increasingly accommodative monetary policy,
which has led to a more positive stance toward Japanese equities,
added to the potential for a near-term decline in Japanese bond
yields. At the same time, we believed that the shift in monetary
policy was likely to lead to a weaker yen; therefore, we reestablished
the hedge of Japanese securities back to US dollars. The New Zealand
bond commitment reflects the attractive yield of these obligations
relative to US fixed-income securities. We maintained a position in
German bonds. During the three months ended February 28, 1999, we
extended the average duration of our US bond position from 6.3
years to 7 years, taking advantage of rising yields during the
quarter.
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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Thomas R. Robinson)
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
March 30, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Asset Growth Fund,
Inc.'s Board of Directors. We are pleased to announce that Terry K.
Glenn has been elected President and Director of the Fund. Mr. Glenn
has held the position of Executive Vice President of MLAM since
1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
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.
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +7.40% +1.77%
Inception (9/02/94)
through 12/31/98 +6.83 +5.51
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +6.26% +2.26%
Inception (9/02/94)
through 12/31/98 +5.74 +5.74
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 +6.30% +5.30%
Inception (10/21/94)
through 12/31/98 +6.31 +6.31
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/98 +7.14% +1.52%
Inception (10/21/94)
through 12/31/98 +7.16 +5.80
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Asset Growth Fund, Inc. Class A Shares +1.05% +3.94% +30.51%
ML Asset Growth Fund, Inc. Class B Shares +0.06 +3.75 +24.70
ML Asset Growth Fund, Inc. Class C Shares +0.06 +3.77 +26.54
ML Asset Growth Fund, Inc. Class D Shares +0.75 +3.92 +30.94
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's since inception periods are Class A & Class B Shares, from
9/02/94 to 2/28/99 and Class C & Class D Shares, from 10/21/94 to
2/28/99.
</TABLE>
<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>
Austria Paper Products 500 Mayr-Melnhof Karton AG $ 25,314 $ 23,815 0.3%
Total Common Stocks in Austria 25,314 23,815 0.3
Canada Computer Graphics 800 ++ATI Technologies Inc. 12,531 11,038 0.2
Telecommunications 1,150 Teleglobe Inc. 32,390 36,081 0.5
Total Common Stocks in Canada 44,921 47,119 0.7
Denmark Commercial Services 100 ISS International Service System A/S 'B' 6,525 6,173 0.1
Total Common Stocks in Denmark 6,525 6,173 0.1
Finland Communications 345 Nokia Oyj 'A' 33,583 47,016 0.7
Equipment
Diversified 1,900 Amer Group Ltd. 33,365 28,156 0.4
Insurance 900 Sampro Insurance Company PLC 'A' 41,729 29,737 0.4
Paper & Forest 1,000 UPM-Kymmene Oyj 24,951 25,961 0.4
Products
Pharmaceuticals 920 Orion-Yhtyma OY 'B' 23,989 18,875 0.3
Real Estate 5,990 ++Sponda Oyj 42,205 33,862 0.5
Investment Trusts
Total Common Stocks in Finland 199,822 183,607 2.7
France Electronics 700 Thomson CSF SA 26,480 20,747 0.3
Foods 185 Danone 51,940 46,078 0.7
Information 50 Cap Gemini SA 7,627 8,644 0.1
Processing
Insurance 215 Axa 23,956 28,037 0.4
Oil--Related 435 Elf Aquitaine SA 53,180 45,362 0.7
Reinsurance 723 SCOR SA 29,305 37,182 0.5
Semiconductor Capital 501 ++STMicroelectronics NV (NY Registered
Equipment Shares) 35,472 43,775 0.6
Telecommunications 400 France Telecom SA 28,066 37,432 0.6
Utilities--Water 188 Vivendi 40,427 49,012 0.7
Total Common Stocks in France 296,453 316,269 4.6
Germany Automobiles 485 DaimlerChrysler AG 42,307 45,333 0.6
Chemicals 600 Henkel KGaA (Preferred) 25,574 48,079 0.7
Total Common Stocks in Germany 67,881 93,412 1.3
Ireland Banking 2,100 Bank of Ireland 44,433 43,376 0.6
Total Common Stocks in Ireland 44,433 43,376 0.6
Italy Publishing 2,800 Mondadori (Arnoldo) Editore SpA 23,578 43,030 0.6
Telecommunications 5,800 Telecom Italia SpA 45,088 61,056 0.9
Total Common Stocks in Italy 68,666 104,086 1.5
Japan Automobiles 469 Toyota Motor Corporation (ADR)(a) 24,210 24,271 0.4
Banking 2,000 The Bank of Tokyo-Mitsubishi, Ltd. 23,496 24,111 0.4
2,000 The Sanwa Bank, Ltd. 19,659 20,486 0.3
2,000 The Sumitomo Bank, Ltd. 24,951 24,127 0.4
68,106 68,724 1.1
Computers 3,000 NEC Corporation 29,575 30,298 0.4
Consumer--Electronics 1,000 Matsushita Electric Industrial
Company, Ltd. 15,850 16,734 0.2
Cosmetics/Toiletries 1,000 Kao Corporation 19,901 19,980 0.3
Diversified Companies 2,000 Olympus Optical Co., Ltd. 22,472 21,750 0.3
Electrical Equipment 4,000 Fujikura Ltd. 22,606 21,582 0.3
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
<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>
Japan Electronics 2,000 Fujitsu Limited $ 24,035 $ 24,954 0.4%
(concluded) 3,000 Toshiba Corporation 19,099 18,614 0.3
----------- ----------- ------
43,134 43,568 0.7
Insurance 2,000 The Tokio Marine & Fire Insurance Co. Ltd. 21,073 21,413 0.3
Machine Tools 2,000 Minebea Co., Ltd. 20,620 19,895 0.3
& Machinery
Merchandising 1,000 Marui Co., Ltd. 19,189 16,355 0.2
Photography 1,000 Fuji Photo Film 37,194 36,756 0.5
280 Fuji Photo Film (ADR)(a) 10,150 10,185 0.2
----------- ----------- ------
47,344 46,941 0.7
Retail 384 Ito-Yokado Co., Ltd. (ADR)(a) 22,272 22,176 0.3
Telecommunications 1 ++NTT Mobile Communication Network, Inc. 32,998 40,634 0.6
4 Nippon Telegraph & Telephone
Corporation (NTT) 34,178 32,980 0.4
----------- ----------- ------
67,176 73,614 1.0
Total Common Stocks in Japan 443,528 447,301 6.5
Netherlands Broadcasting & 240 Wolters Kluwer NV 'A' 36,667 46,235 0.7
Publishing
Electronic Component 160 ++ASM Lithography Holding NV 6,429 6,577 0.1
Multi-Industry 600 Unilever NV 'A' 44,862 43,271 0.6
Total Common Stocks in the Netherlands 87,958 96,083 1.4
Norway Computer Software 1,300 Merkantildata ASA 9,939 13,473 0.2
Total Common Stocks in Norway 9,939 13,473 0.2
Singapore Electronics Components 360 ++Flextronics International Ltd. 12,587 13,612 0.2
Total Common Stocks in Singapore 12,587 13,612 0.2
South Electronics 90 Samsung Electronics 6,515 6,346 0.1
Korea
Total Common Stocks in South Korea 6,515 6,346 0.1
Spain Building Materials 3,100 Uralita, SA 42,700 30,830 0.4
Real Estate 1,400 Metrovacesa, SA 43,683 36,037 0.5
Telecommunications 1,000 Telefonica, SA 45,827 45,664 0.7
Utilities--Electric 1,800 Endesa, SA 46,988 47,697 0.7
Venture Capital 3,900 ++Dinamia Capital Privado-Sociedad de
Capital Riesgo, SA 71,130 49,489 0.7
Total Common Stocks in Spain 250,328 209,717 3.0
Sweden Auto & Truck 800 Autoliv, Inc. 26,701 30,124 0.4
Automobile & Equipment 500 Volvo AB 'B' 13,941 12,948 0.2
Automobile Parts 2,500 Haldex AB 44,179 34,274 0.5
Banking 900 ForeningsSparbanken AB 11,192 20,564 0.3
4,100 Nordbanken Holding AB 27,195 24,782 0.4
----------- ----------- ------
38,387 45,346 0.7
Diversified Companies 700 Custos AB 'B' 18,434 12,881 0.2
Investment Management 1,700 Bure Investment AB 14,475 23,824 0.3
Real Estate 2,200 Castellum AB 22,897 22,654 0.3
Investment Trusts 3,000 Fastighets AB Tornet 48,453 42,042 0.6
----------- ----------- ------
71,350 64,696 0.9
Telecommunications 1,550 Telefonaktiebolaget LM Ericsson (ADR)(a) 38,473 40,300 0.6
Total Common Stocks in Sweden 265,940 264,393 3.8
Switzerland Drugs 25 Novartis (Registered Shares) 46,746 43,864 0.6
Telephone Service 80 ++Swisscom AG (Registered Shares) 22,160 31,640 0.5
Total Common Stocks in Switzerland 68,906 75,504 1.1
United Automobile Parts 7,100 LucasVarity PLC 22,298 32,242 0.5
Kingdom
Banking 3,700 Bank of Scotland 41,248 53,458 0.8
1,600 HSBC Holdings PLC 42,778 46,644 0.7
3,000 Lloyds TSB Group PLC 40,193 42,984 0.6
2,200 National Westminster Bank PLC 40,089 45,530 0.6
----------- ----------- ------
164,308 188,616 2.7
Beverages 4,008 Diageo PLC 45,227 44,266 0.7
Cable Television 1,600 ++TeleWest Communications PLC 6,196 6,971 0.1
Services
Diversified 13,000 Billiton PLC 29,828 28,216 0.4
Drugs 1,200 Zeneca Group PLC 49,019 49,899 0.7
Foods 4,900 Devro PLC 32,782 14,128 0.2
Metal & Mining 2,600 Rio Tinto PLC (Registered Shares) 31,437 33,671 0.5
Oil--Integrated 1,200 Shell Transport & Trading Company (ADR)(a) 44,090 40,275 0.6
Oil--Related 2,400 BP Amoco PLC 35,539 34,176 0.5
Pharmaceuticals 1,400 Glaxo Wellcome PLC 44,761 44,649 0.6
Telecommunications 600 British Telecommunications PLC 9,902 10,389 0.1
600 Cable & Wireless PLC 9,850 8,203 0.1
500 ++Energis PLC 13,640 11,973 0.2
3,600 Vodafone Group PLC 65,281 66,026 1.0
----------- ----------- ------
98,673 96,591 1.4
Total Common Stocks in the United Kingdom 604,158 613,700 8.9
United Aerospace & Defense 300 United Technologies Corporation 25,926 37,163 0.5
States
Automobiles 1,100 ++Delphi Automotive Systems Corporation 18,700 20,281 0.3
500 General Motors Corporation 41,440 41,281 0.6
344 Honda Motor Co., Ltd. (ADR)(a) 24,900 26,101 0.4
----------- ----------- ------
85,040 87,663 1.3
Automobile Parts 200 Federal-Mogul Corporation 11,733 9,838 0.1
Automobile Rental 1,650 ++Avis Rent A Car, Inc. 39,913 37,847 0.6
& Leasing 350 The Hertz Corporation (Class A) 14,062 13,934 0.2
----------- ----------- ------
53,975 51,781 0.8
Banking 615 BankAmerica Corporation 34,298 40,167 0.6
1,060 Mellon Bank Corporation 66,458 71,683 1.0
----------- ----------- ------
100,756 111,850 1.6
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
<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>
United Beverages 1,550 PepsiCo, Inc. $ 53,862 $ 58,319 0.8%
States
(continued) Broadcasting/Cable 1,550 ++Tele-Communications, Inc. (Class A) 48,636 97,359 1.4
3,150 ++Tele-Communications TCI Ventures
Group (Class A) 44,838 86,822 1.3
----------- ----------- ------
93,474 184,181 2.7
Building Products 700 ++American Tower Corporation (Class A) 17,500 18,769 0.3
Business Services 400 ++Oracle Corporation 23,537 22,325 0.3
Capital Equipment 200 Eaton Corporation 13,473 13,875 0.2
Chemicals 500 E.I. du Pont de Nemours and Company 31,093 25,656 0.4
Computer Services/ 400 ++America Online, Inc. 33,378 35,575 0.5
Software 700 ++BMC Software, Inc. 29,606 28,612 0.4
800 ++Cisco Systems, Inc. 44,822 78,250 1.1
350 International Business Machines
Corporation 43,701 59,500 0.9
750 ++Microsoft Corporation 108,747 112,547 1.6
----------- ----------- ------
260,254 314,484 4.5
Computers 1,700 Compaq Computer Corporation 57,800 59,925 0.9
350 ++EMC Corporation 25,334 35,831 0.5
50 Tandy Corporation 2,759 2,781 0.0
----------- ----------- ------
85,893 98,537 1.4
Consumer--Electronics 450 ++Dell Computer Corporation 27,726 36,028 0.5
Consumer--Products 825 The Black & Decker Corporation 36,891 40,219 0.6
3,250 The Dial Corporation 71,003 94,859 1.4
----------- ----------- ------
107,894 135,078 2.0
Cruise Lines 1,410 Royal Caribbean Cruises Ltd. 35,747 46,530 0.7
Data Processing 300 ++Keane, Inc. 10,542 9,281 0.1
Drugs 500 ++Centocor, Inc. 19,691 20,625 0.3
Electrical Equipment 1,200 PECO Energy Company 42,344 42,525 0.6
Electronics 500 General Electric Company 40,701 50,156 0.7
800 Intel Corporation 93,040 95,950 1.4
450 ++Micron Technology, Inc. 18,965 25,931 0.4
----------- ----------- ------
152,706 172,037 2.5
Entertainment 2,150 ++Premier Parks Inc. 52,882 62,619 0.9
Financial Services 500 Associates First Capital Corporation
(Class A) 17,522 20,312 0.3
1,800 Heller Financial, Inc. 47,899 43,538 0.6
450 Morgan Stanley Dean Witter & Co. 40,022 40,725 0.6
----------- ----------- ------
105,443 104,575 1.5
Financial Services 500 Household International, Inc. 20,954 20,313 0.3
--Consumer
Food Distribution 850 Nabisco Holdings Corp. (Class A) 31,144 37,719 0.6
Foods 1,510 ++Keebler Foods Company 42,826 58,890 0.9
Insurance 950 The Equitable Companies Incorporated 49,508 64,184 0.9
1,160 Providian Financial Corporation 53,239 118,465 1.7
1,050 UNUM Corporation 42,837 46,988 0.7
----------- ----------- ------
145,584 229,637 3.3
Machinery 400 Case Corporation 10,399 7,800 0.1
1,700 Ingersoll-Rand Company 63,386 80,750 1.2
----------- ----------- ------
73,785 88,550 1.3
Machinery & Equipment 200 Sundstrand Corporation 10,290 13,538 0.2
Manufacturing 1,100 Tyco International Ltd. 60,462 81,881 1.2
Medical 800 Beckman Coulter Inc. 45,618 38,650 0.6
Medical Services 1,150 ++HEALTHSOUTH Corporation 14,206 13,369 0.2
Medical Technology 550 Johnson & Johnson 44,104 46,956 0.7
Metals 600 Alcoa Inc. 23,406 24,300 0.4
Natural Gas 1,000 Enron Corporation 47,101 65,000 0.9
Oil--Integrated 600 Mobil Corporation 46,627 49,913 0.7
Oil Services 560 Schlumberger Limited 37,708 27,195 0.4
Petroleum 1,650 Unocal Corporation 57,331 46,509 0.7
Pharmaceutical 950 American Home Products Corporation 53,469 56,525 0.8
--Diversified
Pharmaceuticals 750 Bristol-Myers Squibb Company 77,591 94,453 1.4
400 Cardinal Health, Inc. 29,439 28,875 0.4
400 Pfizer Inc. 51,420 52,775 0.8
----------- ----------- ------
158,450 176,103 2.6
Printing & Publishing 900 ++World Color Press, Inc. 26,381 22,331 0.3
Radio & Television 2,750 ++Capstar Broadcasting Corporation (Class A) 52,043 55,516 0.8
Railroads 2,300 Burlington Northern Santa Fe Corp. 66,527 76,188 1.1
Retail--Specialty 1,450 Lowe's Companies, Inc. 52,740 86,003 1.2
Retail--Stores 1,300 Rite Aid Corporation 43,923 53,788 0.8
1,250 ++Safeway Inc. 51,573 72,188 1.0
950 Wal-Mart Stores, Inc. 47,602 82,056 1.2
----------- ----------- ------
143,098 208,032 3.0
Savings & Loan 2,650 GreenPoint Financial Corp. 99,492 81,322 1.2
Associations
Scientific Equipment 450 Millipore Corporation 10,430 12,544 0.2
Semiconductors 900 Motorola, Inc. 47,523 63,225 0.9
Services 540 ++Quintiles Transnational Corp. 25,741 23,220 0.3
Steel 950 ++Bethlehem Steel Corporation 9,795 8,372 0.1
300 USX-U.S. Steel Group 8,204 7,594 0.1
----------- ----------- ------
17,999 15,966 0.2
Telecommunications 1,450 GTE Corporation 77,066 94,069 1.4
200 Lucent Technologies Inc. 22,375 20,313 0.3
1,100 ++MCI WorldCom Inc. 50,166 90,750 1.3
----------- ----------- ------
149,607 205,132 3.0
Tobacco 400 Philip Morris Companies Inc. 18,738 15,650 0.2
Toys 500 Mattel, Inc. 11,578 13,188 0.2
Utilities-- 1,550 Ameritech Corporation 76,886 101,331 1.5
Communication
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (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>
United Utilities--Electric 950 Public Service Enterprise Group
States Incorporated $ 36,904 $ 36,100 0.5%
(concluded)
Utilities--Gas 1,950 El Paso Energy Corporation 56,236 71,053 1.0
Waste Management 1,200 Waste Management, Inc. 53,711 58,650 0.9
Total Common Stocks in the
United States 3,270,190 3,884,238 56.3
Total Investments in Common Stocks 5,774,064 6,442,224 93.3
<CAPTION>
Face
Amount Fixed-Income Securities
<S> <S> <S> <C> <S> <C> <C> <C>
Germany Foreign E 20,000 BundesObligation, 4.75% due 11/20/2001 24,262 22,808 0.3
Government 90,000 Bundesrepublik Deutschland, 4.75%
Obligations due 7/04/2008 109,596 104,276 1.5
30,000 Deutschland Republic, 4.75% due
7/04/2028 35,549 31,966 0.5
Total Fixed-Income Securities in
Germany 169,407 159,050 2.3
Japan Foreign YEN 6,500,000 Japan-207, 0.90% due 12/22/2008 50,188 49,251 0.7
Government
Obligations
Total Fixed-Income Securities in Japan 50,188 49,251 0.7
New Foreign NZ$ 30,000 Interamerican Development Bank, 5.75%
Zealand Government due 4/15/2004 16,124 15,343 0.2
Obligations
Total Fixed-Income Securities in
New Zealand 16,124 15,343 0.2
United US US$ 90,000 US Treasury Bonds, 6.625% due 2/15/2027 102,209 100,139 1.5
States Government
Obligations
Total Fixed-Income Securities in
the United States 102,209 100,139 1.5
Total Investments in Fixed-Income
Securities 337,928 323,783 4.7
Total Investments $ 6,111,992 6,766,007 98.0
===========
Other Assets Less Liabilities 100,023 1.5
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 34,756 0.5
----------- ------
Net Assets $ 6,900,786 100.0%
=========== ======
<FN>
(a)American Depositary Receipts (ADR).
++Non-income producing security.
++++Forward foreign exchange contracts as of February 28, 1999 were
as follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Note 1b)
C$ 80,000 May 1999 $ 657
Pound 175,000 March 1999 7,180
Sterling
NZ$ 25,000 March 1999 524
YEN 65,000,000 April 1999 26,395
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$932,114) $ 34,756
========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of February 28, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$6,111,992) (Note 1a) $ 6,766,007
Unrealized appreciation on forward foreign exchange contracts
(Note 1b) 34,756
Cash 76,240
Receivables:
Securities sold $ 37,951
Dividends 9,937
Capital shares sold 7,116
Forward foreign exchange contracts (Note 1b) 6,582
Interest 4,707 66,293
-----------
Deferred organization expenses (Note 1f) 22,230
Prepaid registration fees and other assets (Note 1f) 31,721
-----------
Total assets 6,997,247
-----------
Liabilities: Payables:
Securities purchased 27,536
Capital shares redeemed 9,050
Distributor (Note 2) 4,809 41,395
-----------
Accrued expenses and other liabilities 55,066
-----------
Total liabilities 96,461
-----------
Net Assets: Net assets $ 6,900,786
===========
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 5,615
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 53,917
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 4,503
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 2,407
Paid-in capital in excess of par 6,120,389
Accumulated investment loss--net (122,359)
Undistributed realized capital gains on investments and foreign
currency transactions--net 147,902
Unrealized appreciation on investments and foreign currency
transactions--net 688,412
-----------
Net assets $ 6,900,786
===========
Net Asset Value: Class A--Based on net assets of $587,734 and 56,154 shares
outstanding $ 10.47
===========
Class B--Based on net assets of $5,595,211 and 539,167
shares outstanding $ 10.38
===========
Class C--Based on net assets of $464,571 and 45,034
shares outstanding $ 10.32
===========
Class D--Based on net assets of $253,270 and 24,068 shares
outstanding. $ 10.52
===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended February 28, 1999
<S> <S> <C> <C>
Investment Interest and discount earned $ 52,287
Income Dividends (net of $541 foreign witholding tax) 23,669
(Notes 1d & 1e): -----------
Total income 75,956
-----------
Expenses: Accounting services (Note 2) $ 35,247
Investment advisory fees (Note 2) 30,290
Account maintenance and distribution fees--Class B (Note 2) 28,602
Registration fees (Note 1f) 28,590
Printing and shareholder reports 22,192
Professional fees 20,840
Custodian fees 19,960
Transfer agent fees--Class B (Note 2) 12,850
Amortization of organization expenses (Note 1f) 9,629
Directors' fees and expenses 5,462
Transfer agent fees--Class A (Note 2) 3,244
Account maintenance and distribution fees--Class C (Note 2) 2,291
Pricing fees 1,549
Transfer agent fees--Class C (Note 2) 1,096
Transfer agent fees--Class D (Note 2) 537
Account maintenance fees--Class D (Note 2) 320
Other 5,906
-----------
Total expenses before reimbursement 228,605
Reimbursement of expenses (Note 2) (30,290)
-----------
Total expenses after reimbursement 198,315
-----------
Investment loss--net (122,359)
-----------
Realized & Realized gain (loss) from:
Unrealized Investments--net 356,480
Gain (Loss) on Foreign currency transactions--net (158,578) 197,902
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 741,610
(Notes 1b, 1c, Foreign currency transactions--net 61,531 803,141
1e & 3): ----------- -----------
Net realized and unrealized gain on investments and
foreign currency transactions 1,001,043
-----------
Net Increase in Net Assets Resulting from Operations $ 878,684
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the
Six Months For the
Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment loss--net $ (122,359) $ (52,782)
Realized gain on investments and foreign currency transactions
--net 197,902 416,672
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 803,141 (1,169,013)
----------- -----------
Net increase (decrease) in net assets resulting from operations 878,684 (805,123)
----------- -----------
Dividends & Investment income--net:
Distributions to Class A -- (48,495)
Shareholders Class B -- (143,057)
(Note 1g): Class C -- (9,058)
Class D -- (7,535)
In excess of investment income--net:
Class A -- (4,472)
Class B -- (13,192)
Class C -- (835)
Class D -- (695)
Realized gain on investments--net:
Class A (14,379) (228,810)
Class B (26,308) (1,043,599)
Class C (2,164) (67,660)
Class D (1,194) (42,934)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (44,045) (1,610,342)
----------- -----------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (2,700,781) (160,026)
(Note 4): ----------- -----------
Net Assets: Total decrease in net assets (1,866,142) (2,575,491)
Beginning of period 8,766,928 11,342,419
----------- -----------
End of period $ 6,900,786 $ 8,766,928
=========== ===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the For the
Six Period
The following per share data and ratios have been derived Months Sept. 2,
from information provided in the financial statements. Ended 1994++ to
Feb. 28, Forthe Year Ended Aug. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1999++++ 1998++++ 1997++++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.57 $ 12.28 $ 10.13 $ 9.90 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.09) .03 .01 .12 .16
Realized and unrealized gain (loss) on
investments and foreign currency trans-
actions--net 1.06 (.87) 2.30 .34 (.22)
------- ------- ------- ------- -------
Total from investment operations .97 (.84) 2.31 .46 (.06)
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- (.32) (.01) (.16) (.04)
In excess of investment income--net -- (.03) (.15) (.07) --
Realized gain on investments--net (.07) (1.52) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (.07) (1.87) (.16) (.23) (.04)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.47 $ 9.57 $ 12.28 $ 10.13 $ 9.90
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 10.13%+++ (7.49%) 23.06% 4.71% (.59%)+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 3.92%* 2.82% 2.79% 2.47% 2.47%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 4.67%* 3.57% 3.61% 3.75% 3.31%*
======= ======= ======= ======= =======
Investment income (loss)--net (1.87%)* .31% .13% 1.16% 1.46%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 588 $ 2,053 $ 1,803 $ 1,352 $ 1,677
Data: ======= ======= ======= ======= =======
Portfolio turnover 79.57% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<CAPTION>
Class B
For the For the
Six Period
The following per share data and ratios have been derived Months Sept. 2,
from information provided in the financial statements. Ended 1994++ to
Feb. 28, Forthe Year Ended Aug. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1999++++ 1998++++ 1997++++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.51 $ 12.20 $ 10.09 $ 9.83 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.16) (.08) (.11) .01 .05
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.08 (.86) 2.30 .35 (.21)
------- ------- ------- ------- -------
Total from investment operations .92 (.94) 2.19 .36 (.16)
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- (.21) --+++++ (.07) (.01)
In excess of investment income--net -- (.02) (.08) (.03) --
Realized gain on investments--net (.05) (1.52) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (.05) (1.75) (.08) (.10) (.01)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.38 $ 9.51 $ 12.20 $ 10.09 $ 9.83
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 9.64%+++ (8.45%) 21.81% 3.65% (1.60%)+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 5.19%* 3.86% 3.84% 3.50% 3.50%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 5.94%* 4.61% 4.67% 4.78% 4.37%*
======= ======= ======= ======= =======
Investment income (loss)--net (3.36%)* (.73%) (.94%) .13% .43%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 5,595 $ 5,946 $ 8,403 $ 8,141 $11,835
Data: ======= ======= ======= ======= =======
Portfolio turnover 79.57% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
Feb. 28, For the Year Ended Aug. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1999++++ 1998++++ 1997++++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.45 $ 12.13 $ 10.05 $ 9.82 $ 9.85
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.17) (.08) (.11) (.04) .04
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.09 (.86) 2.28 .39 (.05)
------- ------- ------- ------- -------
Total from investment operations .92 (.94) 2.17 .35 (.01)
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- (.20) --+++++ (.08) (.02)
In excess of investment income--net -- (.02) (.09) (.04) --
Realized gain on investments--net (.05) (1.52) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (.05) (1.74) (.09) (.12) (.02)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.32 $ 9.45 $ 12.13 $ 10.05 $ 9.82
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 9.70%+++ (8.47%) 21.71% 3.61% (.05%)+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 5.23%* 3.88% 3.86% 3.52% 3.51%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 5.97%* 4.63% 4.68% 4.81% 4.58%*
======= ======= ======= ======= =======
Investment income (loss)--net (3.38%)* (.73%) (.94%) .09% .51%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 465 $ 459 $ 572 $ 438 $ 735
Data: ======= ======= ======= ======= =======
Portfolio turnover 79.57% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<CAPTION>
Class D
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
Feb. 28, Forthe Year Ended Aug. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1999++++ 1998++++ 1997++++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.61 $ 12.28 $ 10.11 $ 9.88 $ 9.86
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.12) --+++++ (.02) .08 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.08 (.86) 2.30 .36 (.04)
------- ------- ------- ------- -------
Total from investment operations .96 (.86) 2.28 .44 .06
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income--net -- (.27) (.01) (.15) (.04)
In excess of investment income--net -- (.02) (.10) (.06) --
Realized gain (loss) on investments--net (.05) (1.52) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (.05) (1.81) (.11) (.21) (.04)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.52 $ 9.61 $ 12.28 $ 10.11 $ 9.88
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 9.97%+++ (7.66%) 22.66% 4.51% .59%+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 4.41%* 3.07% 3.05% 2.72% 2.75%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 5.16%* 3.82% 3.92% 4.00% 4.32%*
======= ======= ======= ======= =======
Investment income (loss)--net (2.55%)* .02% (.21%) .93% 1.43%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 253 $ 309 $ 564 $ 1,313 $ 1,697
Data: ======= ======= ======= ======= =======
Portfolio turnover 79.57% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
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. The Fund's financial
statements are prepared in accordance with generally accepted
accounting principles 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 main-
tenance and distribution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
(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 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
quotations are not available are valued at fair value as determined
in good faith by or under the direction of the Fund's Board of
Directors, including valuations furnished by a pricing service
retained by the Fund, which may utilize a matrix system for
valuations.
(b) 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
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.
* 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.
* Options--The Fund is authorized to write covered call and put
options and purchase put and call 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
market value of the option written. When a security is purchased or
sold through an exercise of an option, the related premium paid (or
received) is added to (or deducted from) the basis of the security
acquired or deducted from (or added to) the proceeds of the security
sold. When an option expires (or the 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.
(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-
dividend 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) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a period not exceeding five years. Prepaid
registration fees are charged to expense as the related shares are
issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates. Dividends in excess
of net investment income are due primarily to differing tax
treatments for foreign currency transactions.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("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 ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is 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. For the six
months ended February 28, 1999, MLAM earned fees of $30,290, all of
which was voluntarily waived.
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Pursuant to 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 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 February 28, 1999, 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 -- $ 9
Class D $63 $3,422
For the six months ended February 28, 1999, MLPF&S received
contingent deferred sales charges of $1,372 and $82 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $1,044 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended February 28, 1999.
During the six months ended February 28, 1999, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $69 for
security price quotations to compute the net asset value of the
Fund.
Financial Data Services, Inc. ("FDS"), 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, FDS, PFD, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 28, 1999 were $6,202,013 and
$9,043,360, respectively.
Net realized gains (losses) for the six months ended February 28,
1999 and net unrealized gains (losses) as of February 28, 1999 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 356,480 $ 654,015
Forward foreign exchange contracts (183,030) 34,756
Foreign currency transactions 24,452 (359)
---------- ----------
Total $ 197,902 $ 688,412
========== ==========
As of February 28, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $654,015, of which $915,475 related
to appreciated securities and $261,460 related to depreciated
securities. At February 28, 1999, the aggregate cost of investments
for Federal income tax purposes was $6,111,992.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
were $2,700,781 and $160,026 for the six months ended February 28,
1999 and for the year ended August 31, 1998, respectively.
Class A Shares for the Six Months Dollar
Ended February 28, 1999 Shares Amount
Shares sold 12,166 $ 121,610
Shares issued to shareholders in reinvest-
ment of distributions 1,310 13,408
----------- -----------
Total issued 13,476 135,018
Shares redeemed (171,845) (1,863,010)
----------- -----------
Net decrease (158,369) $(1,727,992)
=========== ===========
Class A Shares for the Year Dollar
Ended August 31, 1998 Shares Amount
Shares sold 96,527 $ 1,058,818
Shares issued to shareholders reinvest-
ment of dividends & distributions 26,551 265,240
----------- -----------
Total issued 123,078 1,324,058
Shares redeemed (55,450) (616,366)
----------- -----------
Net increase 67,628 $ 707,692
=========== ===========
Class B Shares for the Six Months Dollar
Ended February 28, 1999 Shares Amount
Shares sold 74,893 $ 759,871
Shares issued to shareholders in reinvest-
ment of distributions 2,189 22,260
----------- -----------
Total issued 77,082 782,131
Automatic conversion of shares (947) (10,219)
Shares redeemed (162,261) (1,632,422)
----------- -----------
Net decrease (86,126) $ (860,510)
=========== ===========
Class B Shares for the Year Dollar
Ended August 31, 1998 Shares Amount
Shares sold 168,419 $ 1,860,233
Shares issued to shareholders in reinvest-
ment of dividends & distributions 94,499 944,985
----------- -----------
Total issued 262,918 2,805,218
Automatic conversion of shares (4,460) (47,580)
Shares redeemed (322,171) (3,447,929)
----------- -----------
Net decrease (63,713) $ (690,291)
=========== ===========
Class C Shares for the Six Months Dollar
Ended February 28, 1999 Shares Amount
Shares sold 5,998 $ 61,742
Shares issued to shareholders in reinvest-
ment of distributions 169 1,713
----------- -----------
Total issued 6,167 63,455
Shares redeemed (9,688) (98,244)
----------- -----------
Net decrease (3,521) $ (34,789)
=========== ===========
Class C Shares for the Year Dollar
Ended August 31, 1998 Shares Amount
Shares sold 19,142 $ 201,591
Shares issued to shareholders in reinvest-
ment of dividends & distributions 7,429 73,920
----------- -----------
Total issued 26,571 275,511
Shares redeemed (25,164) (271,224)
----------- -----------
Net increase 1,407 $ 4,287
=========== ===========
Class D Shares for the Six Months Dollar
Ended February 28, 1999 Shares Amount
Shares sold 11,602 $ 113,893
Automatic conversion of shares 935 10,219
Shares issued to shareholders in reinvest-
ment of distributions 91 936
----------- -----------
Total issued 12,628 125,048
Shares redeemed (20,747) (202,538)
----------- -----------
Net decrease (8,119) $ (77,490)
=========== ===========
Class D Shares for the Year Dollar
Ended August 31, 1998 Shares Amount
Shares sold 12,729 $ 141,881
Automatic conversion of shares 4,424 47,580
Shares issued to shareholders in reinvest-
ment of dividends & distributions 3,808 38,267
----------- -----------
Total issued 20,961 227,728
Shares redeemed (34,696) (409,442)
----------- -----------
Net decrease (13,735) $ (181,714)
=========== ===========
5. Commitments:
At February 28, 1999, the Fund had foreign exchange contracts, in
addition to the contracts listed in the Schedule of Investments,
under which it had agreed to sell various foreign currencies with
approximate values of $29,000.
Merrill Lynch Asset Growth Fund, Inc., February 28, 1999
EQUITY PORTFOLIO CHANGES
For the Quarter Ended February 28, 1999
Additions
ASM Lithography Holding NV
ATI Technologies Inc.
America Online, Inc.
American Home Products Corporation
American Tower Corporation (Class A)
The Bank of Tokyo-Mitsubishi, Ltd.
British Telecommunications PLC
Cable & Wireless PLC
Cap Gemini SA
Cardinal Health, Inc.
Centocor, Inc.
Delphi Automotive Systems
Corporation
Eaton Corporation
Energis PLC
Fuji Photo Film (ADR)
Honda Motor Co., Ltd. (ADR)
Household International, Inc.
Ito-Yokado Co., Ltd. (ADR)
Keane, Inc.
Lucent Technologies Inc.
Mattel, Inc.
Morgan Stanley Dean Witter & Co.
NEC Corporation
Oracle Corporation
Pfizer Inc.
Philip Morris Companies Inc.
Samsung Electronics
The Sanwa Bank, Ltd.
The Sumitomo Bank, Ltd.
Sundstrand Corporation
Tandy Corporation
TeleWest Communications PLC
Toshiba Corporation
Toyota Motor Corporation (ADR)
Vodafone Group PLC
Volvo AB 'B'
Deletions
3Com Corporation
Allmerica Financial Corporation
Banca di Roma SpA
The Bank of New York Company, Inc.
British Aerospace PLC
ConAgra, Inc.
First Union Corporation
Fox Entertainment Group, Inc.
(Class A)
GenCorp, Inc.
Kimberly-Clark Corporation
Magna International, Inc. (Class A)
Morton International, Inc.
Nestle SA (Registered Shares)
Owens-Illinois, Inc.
Spectra-Physics AB 'A'
Texas Utilities Company
Thomson Travel Group PLC
US Airways Group, Inc.
Valora Holding AG
Warner-Lambert Company
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
Thomas R. Robinson, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Barbara G. Fraser, Secretary
Custodian
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800)637-3863
Gerald M. Richard, Treasurer and Norman R. Harvey, Senior Vice
President of Merrill Lynch Asset Growth Fund, Inc. have recently
retired. Their colleagues at Merrill Lynch Asset Management, L.P.
join the Fund's Board of Directors in wishing Mr. Richard and Mr.
Harvey well in their retirements.
