MERRILL LYNCH
ASSET GROWTH
FUND, INC.
FUND LOGO
Semi-Annual Report
February 29, 2000
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
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 29, 2000
Breakdown of
Stocks & Fixed-Income Percent of
Securities by Country Net Assets++
United States 43.0%
Japan 12.8
France 6.3
Germany 5.9
United Kingdom 5.1
Netherlands 2.7
Sweden 2.6
Finland 1.6
Brazil 1.5
Spain 1.2
Canada 1.2
Singapore 0.9
Norway 0.7
Italy 0.7
Switzerland 0.6
Australia 0.5
Austria 0.4
Ireland 0.4
Hong Kong 0.3
South Korea 0.3
Bermuda 0.2
Denmark 0.1
------
Total 89.0%
======
++Total may not equal 100%.
Ten Largest Industries Percent of
(Equity Investments) Net Assets
Telecommunications 8.2%
Electronics 5.6
Computer Services/Software 4.2
Pharmaceuticals 3.4
Computers 3.4
Banking 2.5
Laser Systems & Components 2.1
Chemicals 2.1
Distribution 2.1
Oil-Integrated 1.9
Percent
Ten Largest Holdings of Net
(Equity Investments) Assets
Cisco Systems, Inc. 2.2%
JDS Uniphase Corporation 2.1
Softbank Corporation 2.1
Charter Communications, Inc.
(Class A) 1.9
General Electric Company 1.6
AT&T Corp.-Liberty Media Group
(Class A) 1.5
Microsoft Corporation 1.3
STMicroelectronics NV
(NY Registered Shares) 1.3
AT&T Corp. 1.1
EMC Corporation 1.0
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
DEAR SHAREHOLDER
As of February 29, 2000, the Fund's asset allocation was: US stocks,
42% of net assets; foreign stocks, 40%; US bonds, 1%, foreign bonds,
6%; and cash reserves, 11%.
During the six months ended February 29, 2000, overall equity
representation was reduced from 85% of net assets to 82%. The mix
was shifted in favor of foreign equities, which increased from 37%
of net assets to 40%, while US common stocks were reduced from 48%
of net assets to 42%. Within the foreign equity sector, we enlarged
our commitment to emerging markets. We also maintained a significant
commitment to Japan. We restored the hedge of our Japanese equity
position back into US dollars, since we foresee a weakening yen in
the months ahead. We reduced our allocation to the United Kingdom
through the liquidation of several positions, including British
Telecommunications PLC and BP Amoco PLC. Within Europe, we kept
significant representation in telecommunications services and
equipment, technology and media, consistent with our substantial
commitment to new economy sectors globally.
Our allocation within the US equity sector reflects our focus on
technology and related areas. These groups appear to us to be
capable of exhibiting consistent and above-average revenue and
earnings growth over the next several years, even if the US economy
slows down. Our largest industry representations included computer
software and services and technology hardware and equipment. At the
same time, significant representation was maintained in consumer
staples, healthcare and financial services.
We maintained a defensive position in the fixed-income area, with
the major portion of the cash reserve sector considered as part of
the fixed-income representation. We expect the US Federal Reserve
Board to continue to tighten monetary policy in an effort to prevent
a resurgence of inflation. We believe this restrictive policy bias
will be followed until the US economy exhibits a slowdown. In such
an environment, there is limited potential for a decline in yields
on US securities with maturities of 10 years or less. In the foreign
bond sector, we maintained our commitments in German and UK
obligations, which we believe offer a favorable risk/reward
relationship.
In Conclusion
On January 12, 2000, Merrill Lynch Asset Growth Fund Inc.'s Board of
Directors approved a plan of reorganization, subject to shareholder
approval and certain other conditions, whereby Merrill Lynch Global
Allocation Fund, Inc. would acquire substantially all of the assets
and liabilities of the Fund, Merrill Lynch Asset Income Fund, Inc.
and Global Opportunity Portfolio of Merrill Lynch Asset Builder
Program, Inc. in exchange for newly issued shares of Merrill
Lynch Global Allocation Fund, Inc. These Funds are registered,
non-diversified, open-end management investment companies,
except the Global Opportunity Portfolio, which is diversified.
All four entities are managed by Merrill Lynch Asset Management, L.P.
We thank you for your investment in Merrill Lynch Asset Growth Fund,
Inc.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Thomas R. Robinson)
Thomas R. Robinson
Senior Vice President and
Portfolio Manager
March 28, 2000
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the ex-dividend date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
PERFORMANCE DATA (concluded)
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/99 +22.78% +16.34%
Five Years Ended 12/31/99 +11.78 +10.58
Inception (9/02/94)
through 12/31/99 + 9.66 + 8.56
*Maximum sales charge is 5.25%. (Prior to October 21, 1994, Class A
Shares were offered at a higher sales charge. Thus, actual returns
would have been lower than shown for the inception period.)
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/99 +21.63% +17.63%
Five Years Ended 12/31/99 +10.65 +10.65%
Inception (9/02/94)
through 12/31/99 + 8.56 + 8.56
*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 12/31/99 +21.56% +20.56%
Five Years Ended 12/31/99 +10.62 +10.62
Inception (10/21/94)
through 12/31/99 + 9.08 + 9.08
*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 12/31/99 +22.45% +16.02%
Five Years Ended 12/31/99 +11.50 +10.30
Inception (10/21/94)
through 12/31/99 + 9.95 + 8.82
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
6 Month 12 Month Since Inception
As of February 29, 2000 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Asset Growth Fund, Inc. Class A Shares +16.62% +23.64% +61.36%
ML Asset Growth Fund, Inc. Class B Shares +16.00 +22.37 +52.59
ML Asset Growth Fund, Inc. Class C Shares +16.00 +22.30 +54.75
ML Asset Growth Fund, Inc. Class D Shares +16.55 +23.42 +61.60
*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>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C> <C>
Australia Broadcasting 500 The News Corporation Limited (Convertible
& Publishing Preferred) (ADR)(a) $ 25,156 0.4%
Diversified 1,000 Broken Hill Proprietary Company Limited 9,884 0.1
Total Common Stocks in Australia 35,040 0.5
Austria Paper Products 500 Mayr-Melnhof Karton AG 27,478 0.4
Total Common Stocks in Austria 27,478 0.4
Bermuda Telecommunications & 300 ++Global Crossing Ltd. 13,987 0.2
Equipment
Total Common Stocks in Bermuda 13,987 0.2
Brazil Diversified 1,000 ++Companhia Vale do Rio Doce 'A' (Preferred) 26,561 0.4
Forest Products 1,050 Aracruz Celulose SA (ADR)(a) 21,984 0.3
Oil--Integrated 41,000 Petroleo Brasileiro SA 9,963 0.1
Telecommunications 810 Embratel Participacoes SA (ADR)(a) 19,440 0.3
176 Telecomunicacoes Brasileiras SA-Telebras (Preferred
Block) (ADR)(a) 25,916 0.4
----------- ------
45,356 0.7
Total Common Stocks in Brazil 103,864 1.5
Canada Oil 400 Alberta Energy Company Ltd. 10,861 0.2
Paper Products 2,000 Domtar, Inc. 23,570 0.3
Telecommunications 300 BCE Inc. 32,981 0.5
609 Teleglobe Inc. 15,606 0.2
----------- ------
48,587 0.7
Total Common Stocks in Canada 83,018 1.2
Denmark Commercial Services 100 ++ISS International Service System A/S 'B' 6,677 0.1
Total Common Stocks in Denmark 6,677 0.1
Finland Communications Equipment 316 Nokia Oyj 62,979 0.9
Diversified 850 Amer Group Ltd. 22,096 0.3
Insurance 370 Sampo Insurance Company Ltd. 'A' 12,646 0.2
Paper & Forest Products 545 UPM-Kymmene Oyj 15,112 0.2
Total Common Stocks in Finland 112,833 1.6
France Chemicals 447 Aventis SA 22,810 0.3
Electronics 700 Thomson CSF 27,632 0.4
Foods 126 Groupe Danone 25,330 0.4
Information Processing 50 Cap Gemini SA 13,768 0.2
Insurance 215 Axa 27,014 0.4
Metals 725 Pechiney SA 'A' 42,301 0.6
Multimedia 300 ++Thomson Multimedia 39,513 0.6
Oil--Related 228 Total Fina SA 'B' 30,184 0.4
Reinsurance 723 Scor 28,958 0.4
Semiconductor Capital 428 STMicroelectronics NV (NY Registered Shares) 85,600 1.3
Equipment
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C> <C>
France Telecommunications 308 France Telecom SA $ 49,671 0.7%
(concluded)
Utilities--Water 348 Vivendi 40,877 0.6
Total Common Stocks in France 433,658 6.3
Germany Chemicals 270 Henkel KGaA (Preferred) 14,142 0.2
Electronics Components 55 ++Epcos AG 7,784 0.1
Multi-Industry 350 Veba AG 15,636 0.2
Total Common Stocks in Germany 37,562 0.5
Hong Kong Multi-Industry 1,200 Hutchison Whampoa Limited 18,811 0.3
Total Common Stocks in Hong Kong 18,811 0.3
Ireland Banking 4,200 Bank of Ireland 24,505 0.4
Total Common Stocks in Ireland 24,505 0.4
Italy Oil & Gas Producers 3,700 ENI SpA 17,206 0.3
Publishing 700 Mondadori (Arnoldo) Editore SpA 29,317 0.4
Total Common Stocks in Italy 46,523 0.7
Japan Appliances 81 Sony Corporation (ADR)(a) 25,383 0.4
Automobiles 255 Honda Motor Co., Ltd. (ADR)(a) 17,213 0.2
337 Toyota Motor Corporation (ADR)(a) 27,402 0.4
----------- ------
44,615 0.6
Banking 2,000 The Bank of Tokyo-Mitsubishi, Ltd. 24,487 0.4
3,000 The Sanwa Bank, Ltd. 27,609 0.4
2,000 The Sumitomo Bank, Ltd. 23,613 0.3
----------- ------
75,709 1.1
Chemicals 1,000 Shin-Etsu Chemical Co., Ltd. 54,162 0.8
Computers 2,000 NEC Corporation 44,695 0.6
342 TDK Corporation (ADR)(a) 32,490 0.5
----------- ------
77,185 1.1
Consumer--Electronics 1,000 Matsushita Electric Industrial Company, Ltd. 29,129 0.4
Cosmetics/Toiletries 1,000 Kao Corporation 26,535 0.4
Distribution 100 Softbank Corporation 145,647 2.1
Diversified Companies 2,000 Olympus Optical Co., Ltd. 26,672 0.4
Electronic Components 250 Kyocera Corporation (ADR)(a) 45,984 0.7
Electronics 1,000 Fujitsu Limited 33,226 0.4
1,000 Hitachi Ltd. 13,645 0.2
3,000 Toshiba Corporation 24,496 0.4
----------- ------
71,367 1.0
Glass 5,000 Nippon Sheet Glass Company, Ltd. 45,287 0.7
Insurance 2,000 The Tokio Marine & Fire Insurance Co. Ltd. 18,260 0.3
Internet 100 ++Internet Initiative Japan Inc. (ADR)(a) 10,469 0.2
Machine Tools & 2,000 Minebea Company Ltd. 23,030 0.3
Machinery
Merchandising 1,000 Marui Co., Ltd. 13,108 0.2
Pharmaceuticals 1,000 Takeda Chemical Industries, Ltd. 56,438 0.8
Retail 384 Ito-Yokado Co., Ltd. (ADR)(a) 22,992 0.3
Retail--Stores 1,000 The Daimaru, Inc. 3,213 0.0
Steel 10,000 Nippon Steel Corporation 21,119 0.3
Telecommunications 2 Nippon Telegraph & Telephone Corporation (NTT) 27,673 0.4
Transport Services 4 East Japan Railway Company 18,060 0.3
Total Common Stocks in Japan 882,037 12.8
Netherlands Broadcasting & 595 Wolters Kluwer NV 'A' 21,202 0.3
Publishing
Business & Public 300 Vedior NV 'A' 2,831 0.0
Services
Computer Software 110 Getronics NV 9,214 0.1
Computers 100 ++Equant 11,303 0.2
Electronics 200 Koninklijke (Royal) Philips Electronics NV (NY
Registered Shares) 38,300 0.6
Electronics Components 160 ++ASM Lithography Holding NV 20,373 0.3
Foods 1,400 CSM NV 26,958 0.4
Publishing 750 VNU NV 51,738 0.7
Retail 385 Vendex KBB NV 6,639 0.1
Total Common Stocks in the Netherlands 188,558 2.7
Norway Chemicals 320 Norsk Hydro ASA 11,921 0.2
Computer Software 1,700 Merkantildata ASA 19,658 0.3
Telecommunications 1,100 ++Tandberg Television ASA 9,769 0.1
Transport Services 500 Bergesen d.y. ASA 'B' 8,196 0.1
Total Common Stocks in Norway 49,544 0.7
Singapore Airlines 1,000 Singapore Airlines Limited 9,282 0.2
Construction & Housing 2,000 City Developments Limited 8,122 0.1
Electronics Components 720 ++Flextronics International Ltd. 43,785 0.6
Total Common Stocks in Singapore 61,189 0.9
South Electronics 40 Samsung Electronics 9,053 0.1
Korea
Steel 400 Pohang Iron & Steel Company Ltd. (ADR)(a) 10,050 0.2
Total Common Stocks in South Korea 19,103 0.3
Spain Petroleum--Domestic 1,100 Repsol-YPF, SA 20,811 0.3
Telecommunications 1,440 ++Telefonica, SA 41,385 0.6
Utilities--Electric 1,100 Endesa, SA 23,268 0.3
Total Common Stocks in Spain 85,464 1.2
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C> <C>
Sweden Appliances 1,200 Electrolux AB 'B' $ 22,585 0.3%
Auto & Truck 320 Autoliv, Inc. 8,541 0.1
Automobile Parts 1,400 Haldex AB 15,729 0.2
Diversified Companies 700 Custos AB 'B' 17,406 0.3
Investment Management 3,400 Investment AB Bure 24,820 0.4
Paper Products 1,600 Stora Enso Oyj 'R' 16,151 0.2
Real Estate 2,200 Castellum AB 17,817 0.2
Investment Trust 950 Fastighets AB Tornet 11,974 0.2
----------- ------
29,791 0.4
Telecommunications & 500 Telefonaktiebolaget LM Ericsson 'B' 47,850 0.7
Equipment
Total Common Stocks in Sweden 182,873 2.6
Switzerland Business & 11 Adecco SA (Registered Shares) 8,703 0.1
Public Services
Drugs 8 Novartis AG (Registered Shares) 10,185 0.2
Pharmaceuticals 2 Roche Holding AG (Genuss) 21,554 0.3
Total Common Stocks in Switzerland 40,442 0.6
United Banking 1,665 HSBC Holdings PLC 19,385 0.3
Kingdom
Beverages 2,608 Diageo PLC 19,907 0.3
Cable 1,600 ++Telewest Communications PLC 10,988 0.1
Television Services
Diversified 6,400 Billiton PLC 26,169 0.4
Drugs 455 AstraZeneca Group PLC 14,790 0.2
Household Products 1,750 Reckitt Benckiser PLC 15,209 0.2
Leisure 5,600 Hilton Group PLC 20,488 0.3
Oil--Integrated 1,500 Shell Transport & Trading Company (ADR)(a) 62,344 0.9
Pharmaceuticals 720 Glaxo Wellcome PLC 17,255 0.3
1,530 SmithKline Beecham PLC 17,137 0.2
----------- ------
34,392 0.5
Telecommunications 600 Cable & Wireless PLC 12,456 0.2
305 ++Energis PLC 15,432 0.2
8,400 Vodafone AirTouch PLC 47,110 0.7
----------- ------
74,998 1.1
Transport Services 400 The Peninsular and Oriental Steam Navigation Company 4,506 0.1
Total Common Stocks in the United Kingdom 303,176 4.4
United Aerospace 200 The Boeing Company 7,375 0.1
States
Aerospace & Defense 600 United Technologies Corporation 30,563 0.5
Application 400 ++Siebel Systems, Inc. 55,475 0.8
Development
Software
Banking 615 Bank of America Corporation 28,328 0.4
100 The Bank of New York Company, Inc. 3,331 0.1
200 The Chase Manhattan Corporation 15,925 0.2
----------- ------
47,584 0.7
Beverages 200 The Coca-Cola Company 9,687 0.1
1,050 PepsiCo, Inc. 33,863 0.5
----------- ------
43,550 0.6
Broadcast 200 ++UnitedGlobalCom Inc. (Class A) 20,900 0.3
Broadcasting & Publishing 200 ++TV Guide, Inc. (Class A) 9,413 0.2
Broadcasting/Cable 2,000 ++AT&T Corp.-Liberty Media Group (Class A) 104,500 1.5
Building Products 500 ++American Tower Corporation (Class A) 24,625 0.4
Business Services 200 ++Oracle Corporation 14,838 0.2
Cable 7,600 ++Charter Communications, Inc. (Class A) 133,475 1.9
Chemicals 450 E.I. du Pont de Nemours and Company 22,725 0.3
500 Rohm and Haas Company 20,188 0.3
----------- ------
42,913 0.6
Commerce 100 ++Onvia.com, Inc. 2,100 0.0
Commercial Services 450 ++Convergys Corporation 17,325 0.3
Computer Services/Software 200 ++America Online, Inc. 11,800 0.2
1,170 ++Cisco Systems, Inc. 154,586 2.2
350 International Business Machines Corporation 35,700 0.5
980 ++Microsoft Corporation 87,526 1.3
----------- ------
289,612 4.2
Computer Software 100 ++Digex, Inc. 16,206 0.2
200 ++i2 Technologies, Inc. 32,700 0.5
300 ++Symantec Corporation 21,431 0.3
200 ++Yahoo! Inc. 31,938 0.5
----------- ------
102,275 1.5
Computers 300 Compaq Computer Corporation 7,462 0.1
600 ++EMC Corporation 71,400 1.0
540 ++Sun Microsystems, Inc. 51,435 0.8
280 Tandy Corporation 10,658 0.2
----------- ------
140,955 2.1
Conglomerates 450 Honeywell International Inc. 21,656 0.3
Cosmetics 200 The Gillette Company 7,050 0.1
Electric & Gas 500 ++Calpine Corporation 45,750 0.7
Electrical & Electronics 100 ++The AES Corporation 8,381 0.1
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Common Stocks Value Net Assets
<S> <S> <C> <S> <C> <C>
United Electronics 200 ++Broadcom Corporation (Class A) $ 39,463 0.6%
States 850 General Electric Company 112,359 1.6
(concluded) 505 Intel Corporation 57,065 0.8
200 Texas Instruments Incorporated 33,300 0.5
----------- ------
242,187 3.5
Finance 100 Federal Home Loan Mortgage Association 4,175 0.1
Financial Services 350 Associates First Capital Corporation (Class A) 6,956 0.1
830 Citigroup Inc. 42,901 0.6
800 Wells Fargo Company 26,450 0.4
----------- ------
76,307 1.1
Financial 600 Household International, Inc. 19,162 0.3
Services--Consumer
Healthcare--Products & 500 Columbia/HCA Healthcare Corporation 9,656 0.1
Services
Hotels 300 ++3Com Corporation 29,456 0.4
Household Products 250 Colgate-Palmolive Company 13,047 0.2
300 The Procter & Gamble Company 26,400 0.4
----------- ------
39,447 0.6
Information Processing 1,000 ++Unisys Corporation 29,938 0.4
Insurance 450 AXA Financial, Inc. 13,472 0.2
275 American International Group, Inc. 24,320 0.3
200 ++Clear Channel Communications, Inc. 13,325 0.2
400 ++Sprint Corp. (PCS Group) 20,700 0.3
----------- ------
71,817 1.0
Internet Content 100 ++Net.Genesis Corp. 5,675 0.1
Internet Software 100 ++MatrixOne Inc. 2,500 0.0
Internetworking 200 ++InfoSpace.com, Inc. 43,437 0.6
200 ++Inktomi Corporation 27,413 0.4
100 ++Internet Capital Group, Inc. 10,569 0.2
----------- ------
81,419 1.2
Laser Systems & 560 ++JDS Uniphase Corporation 147,595 2.1
Components
Medical Technology 400 Johnson & Johnson 28,700 0.4
Metals 600 Alcoa Inc. 41,100 0.6
Natural Gas 1,000 Enron Corp. 69,000 1.0
Natural Resources 650 Burlington Resources Inc. 17,956 0.3
Oil--Integrated 858 Exxon Mobil Corporation 64,618 0.9
Oil Services 560 Schlumberger Limited 41,370 0.6
Paper & Forest Products 400 International Paper Company 14,725 0.2
Petroleum 650 Unocal Corporation 17,388 0.3
Pharmaceutical-- 350 American Home Products Corporation 15,225 0.2
Diversified
Pharmaceutical-- 300 Pharmacia & Upjohn, Inc. 14,288 0.2
Prescription
Pharmaceuticals 550 Bristol-Myers Squibb Company 31,247 0.5
500 Cardinal Health, Inc. 20,625 0.3
100 Eli Lilly and Company 5,944 0.1
700 Merck & Co., Inc. 43,094 0.6
750 Pfizer Inc. 24,094 0.3
----------- ------
125,004 1.8
Radio & Television 700 ++AMFM Inc. 42,962 0.6
Retail 400 ++Federated Department Stores, Inc. 14,675 0.2
Retail--Specialty 715 Lowe's Companies, Inc. 34,052 0.5
Retail--Stores 1,250 ++Safeway Inc. 48,203 0.7
840 Wal-Mart Stores, Inc. 40,898 0.6
----------- ------
89,101 1.3
Semiconductors 339 Motorola, Inc. 57,799 0.8
Systems Software 400 ++Network Associates, Inc. 12,175 0.2
Telecommunications 1,493 AT&T Corp. 73,810 1.1
200 ++Adelphia Business Solutions, Inc. 10,275 0.1
450 ++Amdocs Limited 33,384 0.5
1,100 GTE Corporation 64,900 0.9
200 ++Global TeleSystems Group, Inc. 5,000 0.1
200 ++Latitude Communications, Inc. 4,175 0.1
600 Lucent Technologies Inc. 35,700 0.5
945 ++MCI WorldCom Inc. 42,171 0.6
----------- ------
269,415 3.9
Wireless Communication-- 200 ++Nextel Communications, Inc. (Class A) 27,350 0.4
Domestic Paging
& Cellular
Total Common Stocks in the United States 2,926,552 42.4
Total Investments in Common Stocks
(Cost--$4,128,376) 5,682,894 82.3
Face
Amount Fixed-Income Securities
Germany Foreign Euro 387,000 BundesObligation, 4.75% due 11/20/2001 374,467 5.4
Government
Obligations
Total Fixed-Income Securities in Germany 374,467 5.4
United Foreign Pound 30,000 United Kingdom Treasury Gilt, 7.25% due 12/07/2007 51,440 0.7
Kingdom Government Sterling
Obligations
Total Fixed-Income Securities in the United Kingdom 51,440 0.7
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
COUNTRY Industries Amount Fixed-Income Securities Value Net Assets
<S> <S> <S> <C> <S> <C> <C>
United US Government US$ 40,000 US Treasury Notes, 5% due 4/30/2001 $ 39,381 0.6%
States Obligations
Total Fixed-Income Securities in the United States 39,381 0.6
Total Investments in Fixed-Income Securities
(Cost--$517,861) 465,288 6.7
Short-Term Securities
US Government US$ 767,000 Federal Home Loan Banks, 5.72% due 3/01/2000 767,000 11.1
Agency
Obligations*
Total Investments in Short-Term Securities
(Cost--$767,000) 767,000 11.1
Total Investments (Cost--$5,413,237) 6,915,182 100.1
Unrealized Appreciation on Forward Exchange Contracts++++ 34,163 0.5
Liabilities in Excess of Other Assets (42,832) (0.6)
----------- ------
Net Assets $ 6,906,513 100.0%
=========== ======
(a)American Depositary Receipts (ADR).
*US Government Agency Obligations are traded on a discount basis;
the interest rate shown reflects the discount rate paid at the time
of purchase by the Fund.
++Non-income producing security.
++++Forward foreign exchange contracts as of February 29, 2000 were
as follows:
Unrealized
Foreign Expiration Appreciation
Currency Purchased Date (Depreciation)
YEN 5,000,000 April 2000 $ (2,467)
(US$ Commitment--$48,290) $ (2,467)
--------
Foreign
Currency Sold
YEN 90,000,000 April 2000 $ 36,630
(US$ Commitment--$861,425) $ 36,630
--------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net $ 34,163
========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of February 29, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$5,413,237) $ 6,915,182
Unrealized appreciation on forward foreign exchange contracts 34,163
Foreign cash 4,124
Receivables:
Capital shares sold $ 8,212
Dividends 6,485
Interest 6,402
Forward foreign exchange contracts 68 21,167
-----------
Prepaid registration fees and other assets 49,102
-----------
Total assets 7,023,738
-----------
Liabilities: Payables:
Capital shares redeemed 23,666
Securities purchased 18,374
Distributor 4,768 46,808
-----------
Accrued expenses and other liabilities 70,417
-----------
Total liabilities 117,225
-----------
Net Assets: Net assets $ 6,906,513
===========
Net Assets Class A Shares of Common Stock, $.10 par value, 100,000,000
Consist of: shares authorized $ 5,786
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 48,856
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 3,705
Class D Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 2,509
Paid-in capital in excess of par 5,503,328
Accumulated investment loss--net (154,613)
Accumulated realized capital losses on investments and foreign
currency transactions--net (39,186)
Unrealized appreciation on investments and foreign currency
transactions--net 1,536,128
-----------
Net assets $ 6,906,513
===========
Net Asset Value: Class A--Based on net assets of $668,774 and 57,862
shares outstanding $ 11.56
===========
Class B--Based on net assets of $5,530,285 and 488,558
shares outstanding $ 11.32
===========
Class C--Based on net assets of $416,465 and 37,053
shares outstanding $ 11.24
===========
Class D--Based on net assets of $290,989 and 25,091
shares outstanding. $ 11.60
===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended February 29, 2000
<S> <S> <C> <C>
Investment Interest and discount earned $ 26,700
Income: Dividends (net of $1,096 foreign witholding tax) 19,046
-----------
Total income 45,746
-----------
Expenses: Accounting services $ 48,844
Printing and shareholder reports 33,616
Account maintenance and distribution fees--Class B 26,462
Professional fees 25,724
Registration fees 24,634
Investment advisory fees 24,557
Custodian fees 11,822
Transfer agent fees--Class B 11,189
Directors' fees and expenses 6,637
Account maintenance and distribution fees--Class C 2,011
Transfer agent fees--Class A 1,169
Transfer agent fees--Class C 937
Transfer agent fees--Class D 527
Account maintenance fees--Class D 331
Other 6,456
-----------
Total expenses before reimbursement 224,916
Reimbursement of expenses (24,557)
-----------
Total expenses after reimbursement 200,359
-----------
Investment loss--net (154,613)
-----------
Realized & Realized gain (loss) from:
Unrealized Investments--net 336,801
Gain (Loss) on Foreign currency transactions--net (5,710) 331,091
Investments & -----------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net 779,131
Foreign currency transactions--net 34,324 813,455
----------- -----------
Net Increase in Net Assets Resulting from Operations $ 989,933
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Year
Ended Ended
February 29, August 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment loss--net $ (154,613) $ (288,935)
Realized gain on investments and foreign currency
transactions--net 331,091 707,019
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 813,455 837,402
----------- -----------
Net increase in net assets resulting from operations 989,933 1,255,486
----------- -----------
Distributions to Realized gain on investments--net:
Shareholders: Class A (68,032) (14,379)
Class B (594,317) (26,308)
Class C (45,766) (2,164)
Class D (30,247) (1,193)
----------- -----------
Net decrease in net assets resulting from distributions
to shareholders (738,362) (44,044)
----------- -----------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions: share transactions 467,139 (3,790,567)
----------- -----------
Net Assets: Total increase (decrease) in net assets 718,710 (2,579,125)
Beginning of period 6,187,803 8,766,928
----------- -----------
End of period $ 6,906,513 $ 6,187,803
=========== ===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Feb. 29, Forthe Year Ended August 31,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.10 $ 9.57 $ 12.28 $ 10.13 $ 9.90
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.22) (.23) .03 .01 .12
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.98 1.83 (.87) 2.30 .34
-------- -------- -------- -------- --------
Total from investment operations 1.76 1.60 (.84) 2.31 .46
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.32) (.01) (.16)
In excess of investment income--net -- -- (.03) (.15) (.07)
Realized gain on investments--net (1.30) (.07) (1.52) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.30) (.07) (1.87) (.16) (.23)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.56 $ 11.10 $ 9.57 $ 12.28 $ 10.13
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.62%+++ 16.76% (7.49%) 23.06% 4.71%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 5.18%* 4.46% 2.82% 2.79% 2.47%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 5.93%* 5.22% 3.57% 3.61% 3.75%
======== ======== ======== ======== ========
Investment income (loss)--net (3.80%)* (2.40%) .31% .13% 1.16%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 669 $ 502 $ 2,053 $ 1,803 $ 1,352
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.13% 141.99% 104.48% 128.28% 120.43%
======== ======== ======== ======== ========
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Feb. 29, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.95 $ 9.51 $ 12.20 $ 10.09 $ 9.83
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.27) (.44) (.08) (.11) .01
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.94 1.93 (.86) 2.30 .35
-------- -------- -------- -------- --------
Total from investment operations 1.67 1.49 (.94) 2.19 .36
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.21) --++++ (.07)
In excess of investment income--net -- -- (.02) (.08) (.03)
Realized gain on investments--net (1.30) (.05) (1.52) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.30) (.05) (1.75) (.08) (.10)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.32 $ 10.95 $ 9.51 $ 12.20 $ 10.09
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.00%+++ 15.66% (8.45%) 21.81% 3.65%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 6.23%* 6.15% 3.86% 3.84% 3.50%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 6.97%* 6.89% 4.61% 4.67% 4.78%
======== ======== ======== ======== ========
Investment income (loss)--net (4.83%)* (4.17%) (.73%) (.94%) .13%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 5,530 $ 5,080 $ 5,946 $ 8,403 $ 8,141
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.13% 141.99% 104.48% 128.28% 120.43%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Feb. 29, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.88 $ 9.45 $ 12.13 $ 10.05 $ 9.82
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net (.27) (.44) (.08) (.11) (.04)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.93 1.92 (.86) 2.28 .39
-------- -------- -------- -------- --------
Total from investment operations 1.66 1.48 (.94) 2.17 .35
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.20) --++++ (.08)
In excess of investment income--net -- -- (.02) (.09) (.04)
Realized gain on investments--net (1.30) (.05) (1.52) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.30) (.05) (1.74) (.09) (.12)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.24 $ 10.88 $ 9.45 $ 12.13 $ 10.05
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.00%+++ 15.65% (8.47%) 21.71% 3.61%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 6.27%* 6.16% 3.88% 3.86% 3.52%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 7.02%* 6.91% 4.63% 4.68% 4.81%
======== ======== ======== ======== ========
Investment income (loss)--net (4.88%)* (4.19%) (.73%) (.94%) .09%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 417 $ 373 $ 459 $ 572 $ 438
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.13% 141.99% 104.48% 128.28% 120.43%
======== ======== ======== ======== ========
<CAPTION>
Class D
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Feb. 29, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.14 $ 9.61 $ 12.28 $ 10.11 $ 9.88
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.23) (.36) --++++ (.02) .08
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.99 1.94 (.86) 2.30 .36
-------- -------- -------- -------- --------
Total from investment operations 1.76 1.58 (.86) 2.28 .44
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.27) (.01) (.15)
In excess of investment income--net -- -- (.02) (.10) (.06)
Realized gain on investments--net (1.30) (.05) (1.52) -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.30) (.05) (1.81) (.11) (.21)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.60 $ 11.14 $ 9.61 $ 12.28 $ 10.11
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.55%+++ 16.45% (7.66%) 22.66% 4.51%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 5.43%* 5.39% 3.07% 3.05% 2.72%
Average Net ======== ======== ======== ======== ========
Assets: Expenses 6.18%* 6.14% 3.82% 3.92% 4.00%
======== ======== ======== ======== ========
Investment income (loss)--net (4.05%)* (3.42%) .02% (.21%) .93%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 291 $ 233 $ 309 $ 564 $ 1,313
Data: ======== ======== ======== ======== ========
Portfolio turnover 26.13% 141.99% 104.48% 128.28% 120.43%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
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 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 contacts 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) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The 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 six
months ended February 29, 2000, MLAM earned fees of $24,557, all of
which was voluntarily waived.
Merrill Lynch Asset Growth Fund, Inc., February 29, 2000
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 six months ended February 29, 2000, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class D Shares as follows:
MLFD MLPF&S
Class D $108 $49
For the six months ended February 29, 2000, MLPF&S received
contingent deferred sales charges of $488 and $9 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $463 in commissions on the execution of
portfolio security transactions for the Fund for the six months
ended February 29, 2000.
During the six months ended February 29, 2000, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $604 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 29, 2000 were $1,622,693 and
$2,701,569, respectively.
Net realized gains (losses) for the six months ended February 29,
2000 and net unrealized gains as of February 29, 2000 were as
follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ 336,801 $1,501,945
Foreign currency transactions (4,916) 20
Forward foreign exchange contracts (794) 34,163
--------- ----------
Total $ 331,091 $1,536,128
========= ==========
As of February 29, 2000, net unrealized appreciation for Federal
income tax purposes aggregated $1,501,945, of which $1,908,533
related to appreciated securities and $406,588 related to
depreciated securities. At February 29, 2000, the aggregate cost of
investments for Federal income tax purposes was $5,413,237.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $467,139 and $(3,790,567) for the six months ended
February 29, 2000 and for the year ended August 31, 1999,
respectively.
Class A Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
Shares sold 9,435 $ 109,603
Shares issued to shareholders in
reinvestment of distributions 5,545 60,277
--------- ------------
Total issued 14,980 169,880
Shares redeemed (2,343) (26,869)
--------- ------------
Net increase 12,637 $ 143,011
========= ============
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 B Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
Shares sold 51,558 $ 576,748
Shares issued to shareholders in
reinvestment of distributions 46,030 491,141
--------- ------------
Total issued 97,588 1,067,889
Automatic conversion of shares (1,276) (14,371)
Shares redeemed (71,851) (804,785)
--------- ------------
Net increase 24,461 $ 248,733
========= ============
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 C Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
Shares sold 2,645 $ 28,377
Shares issued to shareholders in
reinvestment of distributions 4,004 42,448
--------- ------------
Total issued 6,649 70,825
Shares redeemed (3,839) (42,379)
--------- ------------
Net increase 2,810 $ 28,446
========= ============
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 D Shares for the Six Months Dollar
Ended February 29, 2000 Shares Amount
Shares sold 2,050 $ 23,882
Automatic conversion of shares 1,251 14,371
Shares issued to shareholders in
reinvestment of distributions 2,687 29,338
--------- ------------
Total issued 5,988 67,591
Shares redeemed (1,821) (20,642)
--------- ------------
Net increase 4,167 $ 46,949
========= ============
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
reinvestment of distributions 91 935
--------- ------------
Total issued 18,323 188,208
Shares redeemed (29,586) (300,249)
--------- ------------
Net decrease (11,263) $ (112,041)
========= ============
5. Commitments:
At February 29, 2000, the Fund had entered into 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 an approximate value of $7,700.
6. Reorganization Plan:
On January 12, 2000, the Fund's Board of Directors approved a plan
of reorganization, subject to shareholder approval and certain other
conditions, whereby Merrill Lynch Global Allocation Fund, Inc. would
acquire substantially all of the assets and liabilities of the Fund,
Merrill Lynch Asset Income Fund, Inc. and the Global Opportunity
Portfolio of Merrill Lynch Asset Builder Program, Inc. in exchange
for newly issued shares of Merrill Lynch Global Allocation Fund,
Inc. These Funds are registered, non-diversified, open-end
management investment companies, except for Global Opportunity Port-
folio, which is diversified. All four entities have a similar
investment objective and are managed by MLAM.
