MERRILL LYNCH
ASSET GROWTH
FUND, INC.
FUND LOGO
Annual Report
August 31, 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
August 31, 1999
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States 51.2%
Japan 11.7
Germany 9.8
United Kingdom 7.6
France 4.9
Sweden 2.9
Spain 1.9
Netherlands 1.5
Finland 1.2
Brazil 1.0
Italy 0.9
Canada 0.7
Ireland 0.6
South Korea 0.5
Switzerland 0.5
Norway 0.4
Australia 0.4
Austria 0.4
Singapore 0.3
Hong Kong 0.2
China 0.1
Bermuda 0.1
Denmark 0.1
------
Total 98.9%
======
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 6.2%
Banking 5.8
Pharmaceuticals 5.0
Electronics 4.4
Computer Services/Software 4.3
Computers 3.2
Retail-Stores 2.8
Chemicals 2.5
Oil-Integrated 2.3
Insurance 2.1
Percent
Ten Largest Holdings of Net
(Equity Investments) Assets
Microsoft Corporation 1.8%
Bristol-Myers Squibb Company 1.7
Cisco Systems, Inc. 1.6
General Electric Company 1.5
Enron Corp. 1.4
Intel Corporation 1.3
Tyco International Ltd. 1.2
GTE Corporation 1.2
Shell Transport & Trading
Company (ADR) 1.2
Ameritech Corporation 1.2
[FN]
++Total may not equal 100%.
Merrill Lynch Asset Growth Fund, Inc., August 31, 1999
DEAR SHAREHOLDER
Fiscal Year in Review
For the year ended August 31, 1999, total returns of Merrill Lynch
Asset Growth Fund, Inc.'s Class A, Class B, Class C and Class D
Shares were +16.76%, +15.66%, +15.65% and +16.45% respectively.
(Results shown do not reflect sales charges and would be lower if
sales charges were included. Complete performance information can be
found on pages 3--5 of this report to shareholders.)
Throughout the year ended August 31, 1999, the primary positive
influences on the Fund's performance were US and foreign equities.
In the United States, the Fund's increased position in large-
capitalization equities in areas such as technology proved
beneficial, while commitments in the basic industry and energy
sectors also provided a positive impact during the second half of
the Fund's fiscal year. Our increased commitment to Japanese
equities enabled the Fund to participate in a favorable stock market
environment since February 1999. During the fiscal year ended August
31, 1999, we shifted the Fund's assets from fixed-income securities
to equities in order to seek to enhance the Fund's overall
performance since both the US and foreign equity markets provided
returns exceeding the corresponding bond markets.
Portfolio Matters
As of August 31, 1999, the Fund's asset allocation was: US stocks,
47%; foreign stocks, 38%; US bonds, 4%; foreign bonds, 10%; and cash
reserves, 1%.
During the three months ended August 31, 1999, equity market
strength led us to reduce overall common stock representation from
94% of net assets to 85%. During the August quarter, US common stock
commitments were reduced from 50% of net assets to 47%. However, we
continued to emphasize companies that appeared capable of exhibiting
above-average earnings growth over a period of years and where
valuations appeared reasonable relative to earnings growth
potential. Technology was the largest single group represented among
US equity holdings. Consumer staples, healthcare and financial
services were other areas with significant representation.
The Fund's representation in foreign equities was reduced from 44%
of net assets on May 31, 1999 to 38% by August 31, 1999. After
increasing the Japanese equity representation in prior months, we
maintained an overweight commitment in Japan relative to the
benchmark Morgan Stanley Europe Australasia Far East Index. We
removed the hedge on the Japanese equity positions because we
believe that Japan's improving economy and a strong inflow of funds
into Japanese assets has reduced the potential for a weaker yen. The
Fund's remaining foreign equity commitments were mostly in European
equities. As is the case in the United States, we continued to
emphasize sectors with above-average earnings growth projections for
the next several years and reasonable valuations. Sectors that
fulfilled these criteria included: healthcare, telecommunications
service and equipment, and financial services. We also maintained
positions in Asian markets outside Japan and in Latin America
through Brazilian equities.
We increased foreign bond commitments from 4% of net assets to 10%
and US bonds from 2% to 4% during the three months ended August 31,
1999. We maintained positions in German and UK fixed-income
securities. Evidence of gradual tightening of monetary policy led us
to continue to reduce the duration of our US bond commitments, with
the average duration declining from 6.6 years on May 31, 1999 to 4.9
years by August 31, 1999.
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
October 11, 1999
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., August 31, 1999
PERFORMANCE DATA (concluded)
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Fund's
Class A and Class B Shares compared to growth of an investment in
the Composite Index and the MSCI World Index. Beginning and ending
values are:
9/02/94** 8/99
ML Asset Growth Fund++--
Class A Shares* $ 9,475 $13,110
ML Asset Growth Fund++--
Class B Shares* $10,000 $13,155
Composite Index+++ $10,000 $13,762
MSCI World Index++++ $10,000 $20,573
A line graph depicting the growth of an investment in the Fund's
Class C and Class D Shares compared to growth of an investment in
the Composite Index and the MSCI World Index. Beginning and ending
values are:
10/21/94** 8/99
ML Asset Growth Fund++--
Class C Shares* $10,000 $13,341
ML Asset Growth Fund++--
Class D Shares* $ 9,475 $13,138
Composite Index+++ $10,000 $13,449
MSCI World Index++++ $10,000 $20,553
[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 USand foreign
equity, debt and money market securities.
++++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. The starting date for the Index in the Class A & Class B
Shares' graph is from 8/31/94 and in the Class C & Class D Shares'
graph is from 10/31/94.
+++This unmanaged market capitalization-weighted Index is comprised
of government bonds from major markets, including the United States.
Past performance is not predictive of future performance.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/99 +3.69% -1.75%
Inception (9/02/94)
through 6/30/99 +7.36 +6.17
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 +2.75% -1.25%
Inception (9/02/94)
through 6/30/99 +6.28 +6.28
[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 6/30/99 +2.67% +1.67%
Inception (10/21/94)
through 6/30/99 +6.79 +6.79
[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 6/30/99 +3.47% -1.96%
Inception (10/21/94)
through 6/30/99 +7.64 +6.41
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
3 Month 12 Month Since Inception
As of August 31, 1999 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Asset Growth Fund, Inc. Class A Shares +3.16% +16.76% +38.36%
ML Asset Growth Fund, Inc. Class B Shares +2.91 +15.66 +31.55
ML Asset Growth Fund, Inc. Class C Shares +2.84 +15.65 +33.40
ML Asset Growth Fund, Inc. Class D Shares +3.05 +16.45 +38.65
<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 dates are from 9/02/94 for Class A & Class B
Shares and from 10/21/94 for Class C & Class D Shares.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., August 31, 1999
<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>
Australia Broadcasting & 500 The News Corporation Limited (Preferred)
Publishing (ADR)(a) $ 16,780 $ 13,219 0.2%
Diversified 1,000 Broken Hill Proprietary Company Limited 11,008 10,750 0.2
Total Common Stocks in Australia 27,788 23,969 0.4
Austria Paper Products 500 Mayr-Melnhof Karton AG 25,314 23,964 0.4
Total Common Stocks in Austria 25,314 23,964 0.4
Bermuda Insurance 300 Ace Limited 6,603 6,431 0.1
Total Common Stocks in Bermuda 6,603 6,431 0.1
Brazil Diversified 1,000 ++Companhia Vale do Rio Doce 'A' (Preferred) 14,300 22,222 0.4
Forest Products 1,050 Aracruz Celulose SA (ADR)(a) 14,730 20,803 0.3
Telecommunications 810 Embratel Participacoes SA (ADR)(a) 13,393 8,657 0.1
176 Telecomunicacoes Brasileiras SA-Telebras
(Preferred Block) (ADR)(a) 13,874 13,057 0.2
------------ ------------ ------
27,267 21,714 0.3
Total Common Stocks in Brazil 56,297 64,739 1.0
Canada Computer Graphics 800 ++ATI Technologies Inc. 12,531 9,491 0.2
Paper Products 2,000 Domtar, Inc. 16,071 21,850 0.3
Telecommunications 700 Teleglobe Inc. 19,864 11,944 0.2
Total Common Stocks in Canada 48,466 43,285 0.7
China Internet Content 160 ++China.com Corporation 'A' 5,758 7,020 0.1
Total Common Stocks in China 5,758 7,020 0.1
Denmark Commercial Services 100 ++ISS International Service System A/S 'B' 6,525 5,512 0.1
Total Common Stocks in Denmark 6,525 5,512 0.1
Finland Communications 316 Nokia Oyj 15,923 26,354 0.4
Equipment
Diversified 850 Amer Group Ltd. 14,274 15,120 0.3
Insurance 370 Sampo Insurance Company Ltd. 'A' 17,555 12,109 0.2
Paper & Forest 545 UPM-Kymmene Oyj 14,551 18,843 0.3
Products
Real Estate 500 Sponda Oyj 3,594 2,407 0.0
Investment Trust
Total Common Stocks in Finland 65,897 74,833 1.2
France Chemicals 447 Rhone-Poulenc SA 22,483 21,670 0.4
Electronics 700 Thomson CSF 26,480 25,569 0.4
Foods 126 Danone 36,107 31,153 0.5
Information 50 Cap Gemini SA 7,627 8,578 0.1
Processing
Insurance 215 Axa 23,956 26,738 0.4
Metals 725 Pechiney SA 'A' 33,536 42,173 0.7
Oil--Related 166 Elf Aquitaine SA 20,534 29,091 0.5
Reinsurance 723 Scor 29,305 36,042 0.6
Semiconductor 428 STMicroelectronics NV (NY Registered Shares) 14,832 28,569 0.5
Capital
Equipment
Telecommunications 308 France Telecom SA 21,624 23,964 0.4
Utilities--Water 348 Vivendi 25,977 26,856 0.4
Total Common Stocks in France 262,461 300,403 4.9
Germany Automobiles 290 DaimlerChrysler AG 26,908 21,859 0.3
Chemicals 150 BASF AG 6,731 6,793 0.1
270 Henkel KGaA (Preferred) 11,508 19,525 0.3
------------ ------------ ------
18,239 26,318 0.4
Multi-Industry 350 Veba AG 23,186 22,281 0.4
Total Common Stocks in Germany 68,333 70,458 1.1
Hong Kong Multi-Industry 1,200 Hutchison Whampoa Limited 11,298 11,707 0.2
Total Common Stocks in Hong Kong 11,298 11,707 0.2
Ireland Banking 4,200 Bank of Ireland 44,433 37,997 0.6
Total Common Stocks in Ireland 44,433 37,997 0.6
Italy Oil & Gas 3,700 ENI SpA 22,938 22,226 0.4
Producers
Publishing 1,900 Mondadori (Arnoldo) Editore SpA 15,936 30,789 0.5
Total Common Stocks in Italy 38,874 53,015 0.9
Japan Appliances 276 Sony Corporation (ADR)(a) 23,238 35,138 0.6
Automobiles 255 Honda Motor Co., Ltd. (ADR)(a) 21,385 20,671 0.3
337 Toyota Motor Corporation (ADR)(a) 18,785 21,020 0.4
------------ ------------ ------
40,170 41,691 0.7
Banking 2,000 The Bank of Tokyo-Mitsubishi, Ltd. 25,861 29,868 0.5
3,000 The Sanwa Bank, Ltd. 30,571 41,103 0.7
2,000 The Sumitomo Bank, Ltd. 26,276 27,402 0.4
------------ ------------ ------
82,708 98,373 1.6
Chemicals 1,000 Shin-Etsu Chemical Co., Ltd. 35,428 40,738 0.7
Computers 2,000 NEC Corporation 19,205 32,517 0.5
342 TDK Corporation (ADR)(a) 27,466 40,698 0.7
------------ ------------ ------
46,671 73,215 1.2
Consumer-- 1,000 Matsushita Electric Industrial Company, Ltd. 19,161 19,730 0.3
Electronics
Cosmetics/ 1,000 Kao Corporation 19,901 28,407 0.4
Toiletries
Distribution 100 Softbank Corporation 15,203 34,344 0.5
Diversified 2,000 Olympus Optical Co., Ltd. 22,472 29,795 0.5
Companies
Electronics 1,000 Fujitsu Limited 15,616 29,320 0.5
3,000 Toshiba Corporation 19,583 26,662 0.4
------------ ------------ ------
35,199 55,982 0.9
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., August 31, 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 Glass 5,000 Nippon Sheet Glass Company, Ltd. $ 15,921 $ 23,292 0.4%
(concluded)
Insurance 2,000 The Tokio Marine & Fire Insurance Co. Ltd. 22,856 23,566 0.4
Machine Tools 2,000 Minebea Company Ltd. 20,620 24,114 0.4
& Machinery
Merchandising 1,000 Marui Co., Ltd. 19,189 16,715 0.3
Pharmaceuticals 1,000 Takeda Chemical Industries, Ltd. 36,141 50,237 0.8
Retail 384 Ito-Yokado Co., Ltd. (ADR)(a) 22,272 28,032 0.4
Retail--Stores 1,000 The Daimaru, Inc. 4,534 4,704 0.1
Steel 10,000 Nippon Steel Corporation 24,678 26,215 0.4
Telecommunications 4 Nippon Telegraph & Telephone Corporation (NTT) 34,178 44,940 0.7
Transport Services 4 East Japan Railway Company 22,452 24,224 0.4
Total Common Stocks in Japan 562,992 723,452 11.7
Netherlands Broadcasting & 595 Wolters Kluwer NV 'A' 22,698 22,111 0.4
Publishing
Business & 300 Vedior NV 'A 5,594 5,178 0.1
Public Services
Chemicals 150 Akzo Nobel NV 6,857 6,976 0.1
Electronics 160 ++ASM Lithography Holding NV 6,429 10,118 0.2
Components
Foods 500 CSM NV 26,240 24,862 0.4
Multi-Industry 221 Unilever NV 'A' 18,991 15,343 0.2
Software--Computer 500 ++Baan Company, NV 7,855 6,413 0.1
Total Common Stocks in the Netherlands 94,664 91,001 1.5
Norway Computer Software 1,700 Merkantildata ASA 13,703 17,991 0.3
Transport Services 500 Bergesen d.y. ASA 'B' 7,018 7,300 0.1
Total Common Stocks in Norway 20,721 25,291 0.4
Singapore Electronics 360 ++Flextronics International Ltd. 12,587 21,128 0.3
Components
Total Common Stocks in Singapore 12,587 21,128 0.3
South Electronics 90 Samsung Electronics 6,515 17,085 0.3
Korea
Steel 400 Pohang Iron & Steel Company Ltd. (ADR)(a) 10,856 14,700 0.2
Total Common Stocks in South Korea 17,371 31,785 0.5
Spain Building 1,335 Uralita, SA 18,889 11,754 0.2
Materials
Construction 270 ++Grupo Ferrovial, SA 6,571 5,644 0.1
Petroleum 1,100 Repsol-YPF, SA 23,448 23,028 0.4
--Domestic
Real Estate 755 Metrovacesa, SA 23,532 16,220 0.2
Telecommunications 1,440 ++Telefonica, SA 22,245 22,955 0.4
Utilities 1,100 Endesa, SA 28,649 22,064 0.3
--Electric
Venture Capital 1,800 Dinamia Capital Privado-Sociedad de Capital
Riesgo, SA 31,872 18,813 0.3
Total Common Stocks in Spain 155,206 120,478 1.9
Sweden Auto & Truck 320 Autoliv, Inc. 10,721 11,178 0.2
Automobile 500 Volvo AB 'B' 13,941 14,008 0.2
& Equipment
Automobile Parts 1,400 Haldex AB 24,947 19,018 0.3
Banking 1,350 ForeningsSparbanken AB 11,192 20,303 0.3
4,100 Nordbanken Holding AB 27,195 23,123 0.4
------------ ------------ ------
38,387 43,426 0.7
Diversified 700 Custos AB 'B' 18,434 15,834 0.3
Companies
Investment 3,400 Investment AB Bure 14,475 20,577 0.3
Management
Paper Products 1,600 Stora Enso Oyj 'R' 17,997 21,249 0.4
Real Estate 2,200 Castellum AB 22,897 20,546 0.3
Investment Trust 950 Fastighets AB Tornet 14,215 11,868 0.2
------------ ------------ ------
37,112 32,414 0.5
Total Common Stocks in Sweden 176,014 177,704 2.9
Switzer- Business & 11 Adecco SA (Registered Shares) 6,023 6,062 0.1
land Public Services
Pharmaceuticals 2 Roche Holding AG 22,118 23,126 0.4
Total Common Stocks in Switzerland 28,141 29,188 0.5
United Banking 1,665 HSBC Holdings PLC 15,301 20,585 0.3
Kingdom 2,500 Lloyds TSB Group PLC 35,296 34,564 0.6
------------ ------------ ------
50,597 55,149 0.9
Beverages 2,608 Diageo PLC 29,429 26,399 0.4
Cable Television 1,600 ++TeleWest Communications PLC 6,196 6,215 0.1
Services
Diversified 6,400 Billiton PLC 13,854 26,041 0.4
Drugs 600 AstraZeneca Group PLC 24,774 23,811 0.4
Foods 4,900 Devro PLC 32,782 8,975 0.1
Hardware Products 1,750 Reckitt & Colman PLC 24,136 21,749 0.4
Leisure 5,600 Hilton Group PLC 29,485 21,392 0.3
Oil--Integrated 1,500 Shell Transport & Trading Company (ADR)(a) 54,649 72,281 1.2
Oil--Related 1,835 BP Amoco PLC 29,580 34,053 0.6
Pharmaceuticals 930 Glaxo Wellcome PLC 29,592 24,446 0.4
Real Estate 1,700 The British Land Company PLC 15,146 14,231 0.2
Retail--Stores 600 Dixons Group PLC 13,817 11,289 0.2
Telecommunications 600 British Telecommunications PLC 9,902 9,187 0.2
600 Cable & Wireless PLC 9,850 6,883 0.1
500 ++Energis PLC 13,641 12,805 0.2
1,680 Vodafone AirTouch PLC 30,465 33,849 0.5
------------ ------------ ------
63,858 62,724 1.0
Transport 400 The Peninsular and Oriental Steam
Services Navigation Company 6,175 6,559 0.1
Total Common Stocks in the United Kingdom 424,070 415,314 6.7
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., August 31, 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 Aerospace & 600 United Technologies Corporation $ 25,926 $ 39,675 0.6%
States Defense
Application 450 ++Siebel Systems, Inc. 16,615 30,881 0.5
Development
Software
Automobiles 1,200 Delphi Automotive Systems Corporation 20,643 22,500 0.4
Banking 615 Bank of America Corporation 34,298 37,207 0.6
200 The Chase Manhattan Corporation 16,138 16,737 0.3
2,120 Mellon Bank Corporation 66,458 70,755 1.1
------------ ------------ ------
116,894 124,699 2.0
Beverages 1,550 PepsiCo, Inc. 53,862 52,894 0.9
Broadcasting/ 2,226 ++AT&T Corp.-Liberty Media Group (Class A) 35,309 71,232 1.2
Cable
Building Products 700 ++American Tower Corporation (Class A) 17,500 15,925 0.3
Capital Equipment 200 Eaton Corporation 13,474 19,600 0.3
Chemicals 600 E.I. du Pont de Nemours and Company 37,600 38,025 0.6
500 Rohm and Haas Company 18,324 18,688 0.3
------------ ------------ ------
55,924 56,713 0.9
Computer 1,500 ++Cisco Systems, Inc. 42,898 101,625 1.6
Services/Software 450 International Business Machines Corporation 30,683 56,053 0.9
1,200 ++Microsoft Corporation 102,365 111,000 1.8
------------ ------------ ------
175,946 268,678 4.3
Computer Software 400 ++Transaction Systems Architects, Inc. (Class A) 15,749 11,775 0.2
Computers 300 Compaq Computer Corporation 7,421 6,956 0.1
600 ++EMC Corporation 21,965 36,000 0.6
300 ++Sun Microsystems, Inc. 21,788 23,831 0.4
1,125 Tandy Corporation 32,491 53,156 0.9
------------ ------------ ------
83,665 119,943 2.0
Consumer-- 600 ++Dell Computer Corporation 18,974 29,287 0.5
Electronics
Electrical & 100 ++The AES Corporation 6,375 6,069 0.1
Electronics
Electronics 850 General Electric Company 80,210 95,466 1.5
1,005 Intel Corporation 60,450 82,598 1.3
------------ ------------ ------
140,660 178,064 2.8
Entertainment 1,250 ++Premier Parks Inc. 27,476 40,938 0.7
Financial 350 Associates First Capital Corporation (Class A) 12,428 12,009 0.2
Services 630 Citigroup Inc. 29,518 27,996 0.5
800 Wells Fargo Company 31,762 31,850 0.5
------------ ------------ ------
73,708 71,855 1.2
Financial 900 Household International, Inc. 39,343 33,975 0.5
Services--
Consumer
Foods 1,510 ++Keebler Foods Company 42,826 45,017 0.7
Household Products 600 Colgate-Palmolive Company 27,601 32,100 0.5
300 The Procter & Gamble Company 28,158 29,775 0.5
------------ ------------ ------
55,759 61,875 1.0
Information 1,200 ++Unisys Corporation 38,635 51,600 0.8
Processing 200 Xerox Corporation 11,198 9,550 0.2
------------ ------------ ------
49,833 61,150 1.0
Insurance 275 American International Group, Inc. 25,810 25,489 0.4
250 The Chubb Corporation 15,366 14,297 0.2
200 ++Clear Channel Communications, Inc. 14,127 14,012 0.2
225 The Equitable Companies Incorporated 12,112 13,894 0.2
------------ ------------ ------
67,415 67,692 1.0
Internet 100 ++Internet Initiative Japan Inc. (ADR)(a) 2,918 5,138 0.1
Laser Systems 380 ++JDS Uniphase Corporation 18,148 40,304 0.7
& Components
Machinery & 200 Caterpillar Inc. 11,099 11,325 0.2
Equipment
Manufacturing 750 Tyco International Ltd. 42,433 75,984 1.2
Medical Services 1,600 ++HEALTHSOUTH Corporation 15,523 13,100 0.2
Medical Technology 550 Johnson & Johnson 44,104 56,237 0.9
Metals 600 Alcoa Inc. 23,406 38,737 0.6
Natural Gas 2,000 Enron Corp. 47,101 83,750 1.4
Natural Resources 850 Burlington Resources Inc. 37,943 35,541 0.6
Oil--Integrated 650 Mobil Corporation 51,505 66,544 1.1
Oil Services 560 Schlumberger Limited 37,708 37,380 0.6
400 Union Pacific Resources Group Inc. 7,544 7,175 0.1
------------ ------------ ------
45,252 44,555 0.7
Paper & Forest 400 International Paper Company 19,414 18,825 0.3
Products
Petroleum 1,650 Unocal Corporation 57,331 69,094 1.1
Pharmaceutical 650 American Home Products Corporation 39,436 26,975 0.4
--Diversified
Pharmaceutical 300 Pharmacia & Upjohn, Inc. 18,960 15,675 0.3
--Prescription
Pharmaceuticals 1,500 Bristol-Myers Squibb Company 77,591 105,562 1.7
600 Cardinal Health, Inc. 41,551 38,250 0.6
200 Merck & Co., Inc. 14,012 13,437 0.2
1,500 Pfizer Inc. 64,826 56,625 0.9
------------ ------------ ------
197,980 213,874 3.4
Radio & 1,162 ++AMFM Inc. 44,374 57,259 0.9
Television
Restaurants 800 McDonald's Corporation 34,562 33,100 0.5
Retail 200 ++Best Buy Co., Inc. 9,406 14,050 0.2
400 ++Federated Department Stores, Inc. 21,949 18,400 0.3
------------ ------------ ------
31,355 32,450 0.5
Retail-- 650 Lowe's Companies, Inc. 23,755 29,413 0.5
Specialty
Retail--Stores 500 Dayton Hudson Corporation 33,509 29,000 0.5
1,250 ++Safeway Inc. 51,573 58,203 0.9
1,500 Wal-Mart Stores, Inc. 39,260 66,469 1.1
------------ ------------ ------
124,342 153,672 2.5
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., August 31, 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 Savings & 850 GreenPoint Financial Corp. $ 29,290 $ 21,994 0.4%
States Loan Associations
(concluded)
Semiconductors 489 Motorola, Inc. 29,242 45,110 0.7
Telecommunications 1,143 AT&T Corp. 35,894 51,435 0.8
1,100 GTE Corporation 60,068 75,487 1.2
175 Lucent Technologies Inc. 9,410 11,211 0.2
850 ++MCI WorldCom Inc. 41,249 64,334 1.0
------------ ------------ ------
146,621 202,467 3.2
Tobacco 460 Philip Morris Companies Inc. 21,065 17,221 0.3
Utilities 1,130 Ameritech Corporation 57,315 71,331 1.2
--Communication
Total Common Stocks in the
United States 2,368,350 2,910,112 47.0
Total Investments in Common Stocks 4,528,163 5,268,786 85.1
Face
Amount Fixed-Income Securities
Germany Foreign Euro 387,000 BundesObligation, 4.75% due 11/20/2001 425,007 418,361 6.8
Government 130,000 Deutschland Republic, 4.75% due 7/04/2028 127,664 119,729 1.9
Obligations
Total Fixed-Income Securities in Germany 552,671 538,090 8.7
United Foreign United Kingdom Treasury Gilts:
Kingdom Government Pound 20,000 8% due 12/07/2000 33,447 33,124 0.6
Obliga- Sterling 10,000 6% due 12/07/2028 19,523 19,873 0.3
tions
Total Fixed-Income Securities in
the United Kingdom 52,970 52,997 0.9
United US US$ 180,000 Federal National Mortgage Association,
States Government 5.25% due 1/15/2009 162,647 160,031 2.6
& Agency 100,000 US Treasury Notes, 5.75% due 6/30/2001 100,593 99,953 1.6
Obligations
Total Fixed-Income Securities in the
United States 263,240 259,984 4.2
Total Investments in Fixed-Income Securities 868,881 851,071 13.8
Total Investments $ 5,397,044 6,119,857 98.9
============
Unrealized Depreciation on Forward Foreign Exchange Contracts* (124) 0.0
Other Assets Less Liabilities 68,070 1.1
------------ ------
Net Assets $ 6,187,803 100.0%
============ ======
<FN>
(a)American Depositary Receipts (ADR).
++Non-income producing security.
*Forward foreign exchange contracts as of August 31, 1999 were as
follows:
Unrealized
Foreign Expiration Depreciation
Currency Sold Date (Note 1b)
C$ 70,000 September 1999 $ (124)
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts--Net (US$ Commitment--$46,816) $ (124)
======
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of August 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$5,397,044) (Note 1a) $ 6,119,857
Cash 32,789
Foreign cash (Note 1c) 351
Receivables:
Securities sold $ 143,001
Interest 19,282
Dividends 7,552
Capital shares sold 2,714 172,549
-----------
Prepaid registration fees and other assets (Note 1f) 48,803
-----------
Total assets 6,374,349
-----------
Liabilities: Unrealized depreciation on forward foreign exchange contracts
(Note 1b) 124
Payables:
Capital shares redeemed 40,182
Securities purchased 36,283
Distributor (Note 2) 4,938 81,403
-----------
Accrued expenses and other liabilities 105,019
-----------
Total liabilities 186,546
-----------
Net Assets: Net assets $ 6,187,803
===========
Net Assets Class A Shares of Common Stock, $.10 par value,
Consist of: 100,000,000 shares authorized $ 4,523
Class B Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 46,410
Class C Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 3,424
Class D Shares of Common Stock, $.10 par value,
100,000,000 shares authorized 2,092
Paid-in capital in excess of par 5,040,596
Undistributed realized capital gains on investments
and foreign currency transactions--net 368,085
Unrealized appreciation on investments and foreign
currency transactions--net 722,673
-----------
Net assets $ 6,187,803
===========
Net Asset Value: Class A--Based on net assets of $501,901 and 45,225
shares outstanding $ 11.10
===========
Class B--Based on net assets of $5,080,164 and 464,097
shares outstanding $ 10.95
===========
Class C--Based on net assets of $372,550 and 34,243
shares outstanding $ 10.88
===========
Class D--Based on net assets of $233,188 and 20,924
shares outstanding. $ 11.14
===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., August 31, 1999
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended August 31, 1999
<S> <S> <C> <C>
Investment Dividends (net of $5,574 foreign witholding tax) $ 78,226
Income Interest and discount earned 69,587
(Notes 1d & 1e): -----------
Total income 147,813
-----------
Expenses: Professional fees $ 86,938
Printing and shareholder reports 76,441
Accounting services (Note 2) 60,879
Account maintenance and distribution fees--Class B (Note 2) 56,316
Investment advisory fees (Note 2) 55,808
Registration fees (Note 1f) 31,098
Custodian fees 30,425
Transfer agent fees--Class B (Note 2) 27,732
Amortization of organization expenses (Note 1f) 22,230
Directors' fees and expenses 13,018
Pricing fees 4,659
Transfer agent fees--Class A (Note 2) 4,484
Account maintenance and distribution fees--Class C (Note 2) 4,431
Transfer agent fees--Class C (Note 2) 2,323
Transfer agent fees--Class D (Note 2) 1,222
Account maintenance fees--Class D (Note 2) 654
Other 13,898
-----------
Total expenses before reimbursement 492,556
Reimbursement of expenses (Note 2) (55,808)
-----------
Total expenses after reimbursement 436,748
-----------
Investment loss--net (288,935)
-----------
Realized & Realized gain (loss) from:
Unrealized Investments--net 839,895
Gain (Loss) on Foreign currency transactions--net (132,876) 707,019
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 810,409
(Notes 1b, 1c, Foreign currency transactions--net 26,993 837,402
1e & 3): ----------- -----------
Net realized and unrealized gain on investments and foreign
currency transactions 1,544,421
-----------
Net Increase in Net Assets Resulting from Operations $ 1,255,486
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended
August 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment loss--net $ (288,935) $ (52,782)
Realized gain on investments and foreign currency
transactions--net 707,019 416,672
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 837,402 (1,169,013)
----------- -----------
Net increase (decrease) in net assets resulting from operations 1,255,486 (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 (1,193) (42,934)
----------- -----------
Net decrease in net assets resulting from dividends and
distributions to shareholders (44,044) (1,610,342)
----------- -----------
Capital Share Net decrease in net assets derived from capital share transactions (3,790,567) (160,026)
Transactions ----------- -----------
(Note 4):
Net Assets: Total decrease in net assets (2,579,125) (2,575,491)
Beginning of year 8,766,928 11,342,419
----------- -----------
End of year $ 6,187,803 $ 8,766,928
----------- -----------
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., August 31, 1999
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
Period
The following per share data and ratios have been derived Sept. 2,
from information provided in the financial statements. 1994++ to
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 $ 9.57 $ 12.28 $ 10.13 $ 9.90 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.23) .03 .01 .12 .16
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.83 (.87) 2.30 .34 (.22)
------- ------- ------- ------- -------
Total from investment operations 1.60 (.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 $ 11.10 $ 9.57 $ 12.28 $ 10.13 $ 9.90
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 16.76% (7.49%) 23.06% 4.71% (.59%)+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 4.46% 2.82% 2.79% 2.47% 2.47%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 5.22% 3.57% 3.61% 3.75% 3.31%*
======= ======= ======= ======= =======
Investment income (loss)--net (2.40%) .31% .13% 1.16% 1.46%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 502 $ 2,053 $ 1,803 $ 1,352 $ 1,677
Data: ======= ======= ======= ======= =======
Portfolio turnover 141.99% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<CAPTION>
Class B
For the
Period
The following per share data and ratios have been derived Sept. 2,
from information provided in the financial statements. 1994++ to
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 $ 9.51 $ 12.20 $ 10.09 $ 9.83 $ 10.00
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.44) (.08) (.11) .01 .05
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.93 (.86) 2.30 .35 (.21)
------- ------- ------- ------- -------
Total from investment operations 1.49 (.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 $ 10.95 $ 9.51 $ 12.20 $ 10.09 $ 9.83
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 15.66% (8.45%) 21.81% 3.65% (1.60%)+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 6.15% 3.86% 3.84% 3.50% 3.50%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 6.89% 4.61% 4.67% 4.78% 4.37%*
======= ======= ======= ======= =======
Investment income (loss)--net (4.17%) (.73%) (.94%) .13% .43%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 5,080 $ 5,946 $ 8,403 $ 8,141 $11,835
Data: ======= ======= ======= ======= =======
Portfolio turnover 141.99% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++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., August 31, 1999
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
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 (.44) (.08) (.11) (.04) .04
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.92 (.86) 2.28 .39 (.05)
------- ------- ------- ------- -------
Total from investment operations 1.48 (.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 $ 10.88 $ 9.45 $ 12.13 $ 10.05 $ 9.82
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 15.65% (8.47%) 21.71% 3.61% (.05%)+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 6.16% 3.88% 3.86% 3.52% 3.51%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 6.91% 4.63% 4.68% 4.81% 4.58%*
======= ======= ======= ======= =======
Investment income (loss)--net (4.19%) (.73%) (.94%) .09% .51%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 373 $ 459 $ 572 $ 438 $ 735
Data: ======= ======= ======= ======= =======
Portfolio turnover 141.99% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
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 $ 9.61 $ 12.28 $ 10.11 $ 9.88 $ 9.86
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net (.36) --+++++ (.02) .08 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.94 (.86) 2.30 .36 (.04)
------- ------- ------- ------- -------
Total from investment operations 1.58 (.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 on investments--net (.05) (1.52) -- -- --
------- ------- ------- ------- -------
Total dividends and distributions (.05) (1.81) (.11) (.21) (.04)
------- ------- ------- ------- -------
Net asset value, end of period $ 11.14 $ 9.61 $ 12.28 $ 10.11 $ 9.88
======= ======= ======= ======= =======
Total Investment Based on net asset value per share 16.45% (7.66%) 22.66% 4.51% .59%+++
Return:** ======= ======= ======= ======= =======
Ratios to Expenses, net of reimbursement 5.39% 3.07% 3.05% 2.72% 2.75%*
Average Net ======= ======= ======= ======= =======
Assets: Expenses 6.14% 3.82% 3.92% 4.00% 4.32%*
======= ======= ======= ======= =======
Investment income (loss)--net (3.42%) .02% (.21%) .93% 1.43%*
======= ======= ======= ======= =======
Supplemental Net assets, end of period (in thousands) $ 233 $ 309 $ 564 $ 1,313 $ 1,697
Data: ======= ======= ======= ======= =======
Portfolio turnover 141.99% 104.48% 128.28% 120.43% 42.50%
======= ======= ======= ======= =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++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., August 31, 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. The Fund offers four classes of shares under the Merrill
Lynch Select PricingSM System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C
may be subject to a contingent deferred sales charge. All classes of
shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities that are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written or
purchased are valued at the last sale price in the case of exchange-
traded options. In the case of options traded in the over-the-
counter market, valuation is the last asked price (options written)
or the last bid price (options purchased). Short-term securities are
valued at amortized cost, which approximates market value. Other
investments, including futures contracts and related options, are
stated at market value. Securities and assets for which market
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.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$288,935 have been reclassified between undistributed net realized
capital gains and accumulated net investment loss. These
reclassifications have no effect on net assets or net asset values
per share.
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 .75%, on an annual basis,
of the average daily value of the Fund's net assets. For the year
ended August 31, 1999, MLAM earned fees of $55,808, all of which was
voluntarily waived.
Merrill Lynch Asset Growth Fund, Inc., August 31, 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 .25% .75%
Class C .25 .75
Class D .25 --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended August 31, 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 $ -- $ 10
Class D $ 85 $3,833
For the year ended August 31, 1999, MLPF&S received contingent
deferred sales charges of $9,234 and $447 relating to transactions
in Class B and Class C Shares, respectively.
In addition, MLPF&S received $1,498 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
August 31, 1999.
During the year ended August 31, 1999, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $230 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 year ended August 31, 1999 were $10,234,454 and $14,253,258,
respectively.
Net realized gains (losses) for the year ended August 31, 1999 and
net unrealized gains (losses) as of August 31, 1999 were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 839,895 $ 722,814
Forward foreign exchange contracts (134,286) (124)
Foreign currency transactions 1,410 (17)
---------- ----------
Total $ 707,019 $ 722,673
========== ==========
As of August 31, 1999, net unrealized appreciation for Federal
income tax purposes aggregated $712,872, of which $976,873 related
to appreciated securities and $264,001 related to depreciated
securities. At August 31, 1999, the aggregate cost of investments
for Federal income tax purposes was $5,406,986.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
were $3,790,567 and $160,026 for the years ended August 31, 1999 and
August 31, 1998, respectively.
Class A Shares for the Year Dollar
Ended August 31, 1999 Shares Amount
Shares sold 12,744 $ 127,899
Shares issued to shareholders
in reinvestment of distributions 1,310 13,408
----------- -----------
Total issued 14,054 141,307
Shares redeemed (183,352) (1,989,426)
----------- -----------
Net decrease (169,298) $(1,848,119)
=========== ===========
Class A Shares for the Year Dollar
Ended August 31, 1998 Shares Amount
Shares sold 96,527 $ 1,058,818
Shares issued to shareholders
in reinvestment of dividends
anddistributions 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 Year Dollar
Ended August 31, 1999 Shares Amount
Shares sold 122,879 $ 1,283,271
Shares issued to shareholders
in reinvestment of distributions 2,189 22,260
----------- -----------
Total issued 125,068 1,305,531
Automatic conversion of shares (3,770) (41,509)
Shares redeemed (282,494) (2,941,585)
----------- -----------
Net decrease (161,196) $(1,677,563)
----------- -----------
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 reinvestment of dividends
and 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 Year Dollar
Ended August 31, 1999 Shares Amount
Shares sold 9,731 $ 102,624
Shares issued to shareholders
in reinvestment of distributions 169 1,712
----------- -----------
Total issued 9,900 104,336
Shares redeemed (24,212) (257,180)
----------- -----------
Net decrease (14,312) $ (152,844)
=========== ===========
Class C Shares for the Year Dollar
Ended August 31, 1998 Shares Amount
Shares sold 19,142 $ 201,591
Shares issued to shareholders
in reinvestment of dividends
and 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 Year Dollar
Ended August 31, 1999 Shares Amount
Shares sold 14,520 $ 145,764
Automatic conversion of shares 3,712 41,509
Shares issued to shareholders
in reinvest-
ment of distributions 91 935
----------- -----------
Total issued 18,323 188,208
Shares redeemed (29,586) (300,249)
----------- -----------
Net decrease (11,263) $ (112,041)
=========== ===========
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 reinvestment of dividends
and 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 August 31, 1999, the Fund had foreign exchange contracts, in
addition to the contracts listed in the Schedule of Investments,
under which it had agreed to purchase and sell various foreign
currencies with approximate values of $2,000 and $63,000,
respectively.
Merrill Lynch Asset Growth Fund, Inc., August 31, 1999
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
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, 1999, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for each of the years in the four-year
period then ended and 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 the financial highlights based on our
audits.
We conducted our audits 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, 1999 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing
procedures. 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 audits provide a reasonable basis for our opinion.
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, 1999, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 7, 1999
</AUDIT-REPORT>
EQUITY PORTFOLIO CHANGES (unaudited)
For the Quarter Ended August 31, 1999
Additions
The AES Corporation
AMFM Inc.
Ace Limited
Adecco SA (Registered Shares)
Baan Company, NV
Burlington Resources Inc.
CSM NV
The Chase Manhattan Corporation
China.com Corporation 'A'
The Chubb Corporation
Citigroup Inc.
Compaq Computer Corporation
ENI SpA
East Japan Railway Company
Federated Department Stores, Inc.
HEALTHSOUTH Corporation
Internet Initiative Japan Inc. (ADR)
McDonald's Corporation
Merck & Co., Inc.
Nippon Steel Corporation
The Procter & Gamble Company
Reckitt & Colman PLC
Repsol-YPF, SA
Rhone-Poulenc SA
Roche Holding AG
Shin-Etsu Chemical Co., Ltd.
Sun Microsystems, Inc.
*TD Waterhouse Group, Inc.
Transaction Systems Architects, Inc.
(Class A)
Union Pacific Resources Group Inc.
Veba AG
Vedior NV 'A'
*W. W. Grainger, Inc.
Deletions
America Online, Inc.
Applied Materials, Inc.
Avis Rent A Car, Inc.
Bank of Scotland
Capstar Broadcasting Corporation
(Class A)
Case Corporation
Centocor, Inc.
Elan Corporation PLC (ADR)
Ford Motor Company
Fuji Photo Film
Fuji Photo Film (ADR)
The Goldman Sachs Group, Inc.
The Hertz Corporation (Class A)
Hewlett-Packard Company
Ingersoll-Rand Company
Lattice Semiconductor Corporation
NTT Mobile Communication
Network, Inc.
National Westminster Bank PLC
Providian Financial Corporation
Quintiles Transnational Corp.
Rio Tinto PLC (Registered Shares)
Royal Caribbean Cruises Ltd.
Swisscom AG (Registered Shares)
*TD Waterhouse Group, Inc.
Telecomunicacoes Brasileiras SA-
Telebras (ADR)
Telefonaktiebolaget LM Ericsson (ADR)
The Walt Disney Company
*W. W. Grainger, Inc.
Waste Management, Inc.
[FN]
*Added and deleted in the same quarter.
Merrill Lynch Asset Growth Fund, Inc., August 31, 1999
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, 1999
qualify for the dividends received deduction for corporations.
Additionally, the Fund paid a long-term capital gains distribution
of $.045489 per share to shareholders of record on 12/07/98. All of
this long-term capital gains distribution is subject to the 20% tax
rate.
Please retain this information for your records.
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
Robert C. Doll, Senior Vice President
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
