(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Semi-Annual Report
July 31, 2003
Mercury
Growth Opportunity
Fund
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.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com; and
(3) on the Securities and Exchange Commission's website at
http://www.sec.gov.
Mercury Growth Opportunity Fund,
A Series of The Asset Program, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
PORTFOLIO INFORMATION
GEOGRAPHIC ALLOCATION
As a Percentage of Net Assets as of July 31, 2003++
Percent of
Country Net Assets
United States 92.1%
Netherlands 1.4
Switzerland 1.5
Canada 1.9
++Total may not equal 100%.
AS OF JULY 31, 2003
Ten Largest Equity Percent of
Holdings Net Assets
Intel Corporation 5.3%
General Electric Company 4.9
Cisco Systems, Inc. 4.0
3M Co. 3.2
Verizon Communications 2.4
Lowe's Companies, Inc. 2.4
Medtronic, Inc. 2.3
Amgen Inc. 2.2
Citigroup Inc. 2.2
United Parcel Service, Inc.
(Class B) 2.0
Percent of
Five Largest Industries* Net Assets
Specialty Retail 10.9%
Semiconductors & Semiconductor
Equipment 8.9
Health Care Equipment & Supplies 8.7
Industrial Conglomerates 8.1
Communications Equipment 5.0
*For Fund compliance purposes, "Industries" means any one or more
of the industry sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease.
July 31, 2003, Mercury Growth Opportunity Fund
DEAR SHAREHOLDER
We are pleased to provide you with this semi-annual report to
shareholders. For the six-month period ended July 31, 2003, Mercury
Growth Opportunity Fund, Inc.'s Class A, Class B, Class C and Class
I Shares had total returns of +15.38%, +14.74%, +14.79% and +15.46%,
respectively. The unmanaged benchmark Standard & Poor's 500 (S&P
500) Index had a total return of +16.79%, while the Lipper Large Cap
Growth Funds Average was +17.72% for the same period. (Fund results
shown do not reflect sales charges and would be lower if sales
charges were included. Complete performance information can be found
on pages 5 - 7 of this report to shareholders.)
While the Fund provided positive absolute performance, it did not
parallel the return of the benchmark S&P 500 Index. The Fund focuses
on the highest quality and largest capitalization growth stocks in
the benchmark Index. As a group, these companies provided lower
total investment returns during the period than the lower-quality,
smaller-capitalization growth stocks in the Index.
Portfolio Matters
In late March 2003, we began moving the portfolio toward companies
with smaller average stock market capitalizations, while still
focusing on high quality in terms of management, financials and
caliber of products and/or services as well as on the individual
companies' prospects for above-average earnings growth. Along these
lines, we added several new stocks to the portfolio, including
International Game Technology, InterActiveCorp, eBay Inc., Ross
Stores, Inc., Tiffany & Co., PETsMART, Inc., Coach, Inc., Nike,
Inc., SUPERVALU Inc., Devon Energy Corporation, Citigroup Inc.,
Gilead Sciences, Inc., DENTSPLY International Inc., Anthem Inc.,
UnitedHealth Group Incorporated, Wellpoint Health Networks Inc.,
Forest Laboratories, Inc., Hewitt Associates, Inc., General Electric
Company, ITT Industries, Inc., Affiliated Computer Services, Inc.,
Altera Corporation, ASM Lithography Holding NV, Xilinx, Inc., Citrix
Systems Inc., Symantec Corporation, Mercury Interactive Corporation
and Nortel Networks Corporation.
The Fund's average weighted market capitalization at the close of
the period was about $50 billion, down from almost $80 billion at
the beginning of the period. Many of the additions contributed
positively to the Fund's absolute performance as well as to its
relative performance versus its benchmark and peer group of Lipper
Large Cap Growth Funds in July 2003.
The Fund's investments in hospital management companies HCA Inc.,
Tenet Healthcare Corporation and Health Management Associates, Inc.
detracted from performance in the six months ended July 31, 2003. As
a result, we eliminated these positions from the portfolio. Our
fundamental business outlook for the hospital management industry
turned negative as we saw changes in U.S. Medicare reimbursement
policies and practices and renewed competition from non-profit
hospitals for the first time in approximately 20 years.
July 31, 2003, Mercury Growth Opportunity Fund
The Fund's holdings in two of the largest information technology
companies, Microsoft Corporation and International Business Machines
Corporation (IBM), also hindered performance during the period. We
sold our position in IBM when the U.S. Securities and Exchange
Commission announced a formal investigation of the company's
reported earnings for the years 2000 and 2001. We eliminated our
position in Microsoft after CEO Steven Ballmer sold more than
$1 billion of his personal stock and announced that the company's
business outlook for both the short term and intermediate term was
not favorable.
Investment Outlook
The portfolio is structured to benefit from real growth in consumer
spending and the start of a recovery in overall corporate and small
business capital spending. We believe the increased Federal
spending, which is heavily geared toward homeland security and
Defense Department supplies, could continue at elevated levels as
the post-war rebuilding effort in Iraq requires more U.S.
involvement than initially anticipated. Most important in the United
States are the recent tax rebates, which appear to be making an
impact in terms of higher levels of retail sales, and the lower
Federal income tax and withholding tax rates. The Federal tax law
changes also included substantial tax incentives for capital
investment by both large corporations and small businesses.
The Fund is most overweight in the consumer discretionary sector.
This reflects our optimism for a strengthening U.S. economy and
improving corporate profits, which we believe could translate into
higher stock market levels during the remainder of 2003.
In Conclusion
On August 14, 2003, the Fund's Board of Directors approved a plan of
reorganization, subject to shareholder approval and certain other
conditions, whereby Merrill Lynch Fundamental Growth Fund, Inc. will
acquire all of the assets and will assume all of the liabilities of
the Fund in exchange for newly issued shares of Merrill Lynch
Fundamental Growth Fund, Inc.
We thank you for your investment in Mercury Growth Opportunity Fund.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Lawrence R. Fuller)
Lawrence R. Fuller
Vice President and
Portfolio Manager
August 15, 2003
July 31, 2003, Mercury Growth Opportunity Fund
FUND PERFORMANCE DATA
ABOUT FUND PERFORMANCE
The Fund offers multiple classes of shares, each with its own sales
charge and expense structure, allowing you to invest in the way that
best suits your needs. Prior to April 3, 2000, Class A Shares were
designated Class D Shares and Class I Shares were designated Class A
Shares.
CLASS A SHARES incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
CLASS B SHARES are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first two years, decreasing to
3% for each of the next two years and decreasing 1% each year
thereafter to 0% after the sixth 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 A Shares after approximately eight years.
CLASS C SHARES are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares may be
subject to a 1% contingent deferred sales charge if redeemed within
one year after purchase.
CLASS I SHARES incur a maximum initial sales charge (front-end load)
of 5.25% and bear no ongoing distribution and account maintenance
fees. Class I Shares are available only to eligible investors.
None of the past results shown should be considered a representation
of future performance. Performance results do not reflect the
deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in
each of the following 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.
July 31, 2003, Mercury Growth Opportunity Fund
FUND PERFORMANCE DATA (CONTINUED)
RECENT PERFORMANCE RESULTS
6-Month 12-Month Since Inception
As of July 31, 2003 Total Return Total Return Total Return
Class A* +15.38% + 4.68% +51.89%
Class B* +14.74 + 3.65 +42.40
Class C* +14.79 + 3.66 +42.08
Class I* +15.46 + 4.94 +54.49
Standard & Poor's 500 Index** +16.79 +10.64 +75.14
*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 the Fund's net asset
values for the periods shown, and assume reinvestment of all
dividends and capital gains at net asset value on the ex-dividend
date. The Fund commenced operations on 2/02/96.
**This unmanaged Index covers 500 industrial, utility,
transportation and financial companies of the U.S. markets (mostly
NYSE issues), representing about 75% of NYSE market capitalization
and 30% of NYSE issues. Since inception total return is from
2/02/96.
July 31, 2003, Mercury Growth Opportunity Fund
FUND PERFORMANCE DATA (CONCLUDED)
AVERAGE ANNUAL TOTAL RETURN
% Return % Return
Without Sales With Sales
Class A Shares* Charge Charge**
One Year Ended 7/31/03 +4.68% -0.81%
Five Years Ended 7/31/03 -2.61 -3.66
Inception (2/02/96) through 7/31/03 +5.74 +4.98
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without With
Class B Shares* CDSC CDSC**
One Year Ended 7/31/03 +3.65% -0.35%
Five Years Ended 7/31/03 -3.45 -3.76
Inception (2/02/96) through 7/31/03 +4.83 +4.83
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without With
Class C Shares* CDSC CDSC**
One Year Ended 7/31/03 +3.66% +2.66%
Five Years Ended 7/31/03 -3.47 -3.47
Inception (2/02/96) through 7/31/03 +4.80 +4.80
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without Sales With Sales
Class I Shares* Charge Charge**
One Year Ended 7/31/03 +4.94% -0.57%
Five Years Ended 7/31/03 -2.37 -3.42
Inception (2/02/96) through 7/31/03 +5.98 +5.22
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
July 31, 2003, Mercury Growth Opportunity Fund
SCHEDULE OF INVESTMENTS
In U.S. Dollars
Shares Percent of
Industry+++ Held Common Stocks Value Net Assets
Aerospace & 20,700 General Dynamics Corporation $ 1,642,338 1.5%
Defense
Air Freight & 34,400 United Parcel Service, Inc. (Class B) 2,169,952 2.0
Logistics
Beverages 20,200 Anheuser-Busch Companies, Inc. 1,046,764 1.0
Biotechnology 35,000 ++Amgen Inc. 2,435,300 2.2
26,300 ++Gilead Sciences, Inc. 1,802,865 1.7
------------ ------
4,238,165 3.9
Capital Markets 25,800 Northern Trust Corporation 1,126,428 1.0
27,000 State Street Corporation 1,239,300 1.2
43,900 T. Rowe Price Group Inc. 1,781,901 1.6
------------ ------
4,147,629 3.8
Chemicals 58,200 Ecolab Inc. 1,438,122 1.3
Commercial 20,600 ++Apollo Group, Inc. (Class A) 1,334,056 1.2
Services & 14,700 ++Career Education Corporation 1,225,980 1.1
Supplies 13,500 ++Hewitt Associates, Inc. (Class A) 348,570 0.3
------------ ------
2,908,606 2.6
Communications 227,000 ++Cisco Systems, Inc. 4,431,040 4.0
Equipment 368,900 ++Nortel Networks Corporation 1,088,255 1.0
------------ ------
5,519,295 5.0
Computers & 50,000 Hewlett-Packard Company 1,058,500 1.0
Peripherals 23,000 ++SanDisk Corporation 1,303,870 1.2
------------ ------
2,362,370 2.2
Containers & 19,300 Ball Corporation 959,210 0.9
Packaging
Diversified 53,600 Citigroup Inc. 2,401,280 2.2
Financial
Services
Diversified 76,500 Verizon Communications 2,666,790 2.4
Telecommunication
Services
July 31, 2003, Mercury Growth Opportunity Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
In U.S. Dollars
Shares Percent of
Industry+++ Held Common Stocks Value Net Assets
Energy 27,800 ++BJ Services Company $ 952,150 0.9%
Equipment & 36,000 Baker Hughes Incorporated 1,130,760 1.0
Service ------------ ------
2,082,910 1.9
Food Products 63,100 Archer-Daniels-Midland Company 829,134 0.8
Food & Staples 45,000 SUPERVALU Inc. 1,059,750 1.0
Retailing 36,800 SYSCO Corporation 1,108,784 1.0
------------ ------
2,168,534 2.0
Health Care 33,300 Alcon, Inc. 1,697,301 1.5
Equipment & 29,700 ++Boston Scientific Corporation 1,877,931 1.7
Supplies 25,000 DENTSPLY International Inc. 1,085,250 1.0
48,100 Medtronic, Inc. 2,477,150 2.3
15,000 Stryker Corporation 1,147,800 1.0
20,800 ++Varian Medical Systems, Inc. 1,276,288 1.2
------------ ------
9,561,720 8.7
Health Care 14,900 ++Anthem, Inc. 1,125,099 1.0
Providers & 27,100 UnitedHealth Group Incorporated 1,411,639 1.3
Services 15,600 ++WellPoint Health Networks Inc. 1,304,940 1.2
------------ ------
3,841,678 3.5
Hotels, 20,100 ++Brinker International, Inc. 703,500 0.7
Restaurants & 27,800 ++Krispy Kreme Doughnuts, Inc. 1,213,748 1.1
Leisure 45,000 ++Starbucks Corporation 1,229,850 1.1
70,900 ++YUM! Brands, Inc. 2,122,037 1.9
------------ ------
5,269,135 4.8
IT Services 24,900 ++Affiliated Computer Services, Inc.
(Class A) 1,233,795 1.1
28,100 First Data Corporation 1,061,056 1.0
35,000 Paychex, Inc. 1,138,550 1.0
------------ ------
3,433,401 3.1
Industrial 25,100 3M Co. 3,519,020 3.2
Conglomerates 189,000 General Electric Company 5,375,160 4.9
------------ ------
8,894,180 8.1
July 31, 2003, Mercury Growth Opportunity Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
In U.S. Dollars
Shares Percent of
Industry+++ Held Common Stocks Value Net Assets
Internet & 15,400 ++eBay Inc. $ 1,650,880 1.5%
Catalog Retail 58,800 International Game Technology 1,496,460 1.4
------------ ------
3,147,340 2.9
Machinery 17,600 ITT Industries, Inc. 1,173,920 1.1
Media 43,000 ++Fox Entertainment Group, Inc. (Class A) 1,301,610 1.2
30,000 ++InterActiveCorp 1,214,100 1.1
66,700 Rogers Communications, Inc. 'B' 1,026,372 0.9
------------ ------
3,542,082 3.2
Oil & Gas 20,300 Devon Energy Corporation 961,611 0.9
Pharmaceuticals 19,900 ++Forest Laboratories, Inc. 952,812 0.9
Semiconductors & 115,100 ++ASM Lithography Holding NV
Semiconductor (NY Registered Shares) 1,489,394 1.3
Equipment 67,300 ++Altera Corporation 1,294,852 1.2
230,700 Intel Corporation 5,755,965 5.3
45,000 ++Xilinx, Inc. 1,182,600 1.1
------------ ------
9,722,811 8.9
Software 48,900 ++Citrix Systems, Inc. 887,535 0.8
13,300 ++Electronic Arts Inc. 1,117,200 1.0
27,600 ++Mercury Interactive Corporation 1,086,336 1.0
27,800 ++Symantec Corporation 1,300,206 1.2
------------ ------
4,391,277 4.0
Specialty Retail 16,300 ++AutoZone, Inc. 1,357,138 1.2
34,200 ++Bed, Bath & Beyond Inc. 1,327,986 1.2
55,900 Lowe's Companies, Inc. 2,658,604 2.4
71,300 ++PETsMART, Inc. 1,413,879 1.3
14,300 ++Rent A Center Inc. 1,042,756 1.0
26,100 Ross Stores, Inc. 1,192,770 1.1
65,900 The TJX Companies, Inc. 1,281,755 1.2
47,600 Tiffany & Co. 1,635,536 1.5
------------ ------
11,910,424 10.9
Textiles, Apparel 31,200 ++Coach, Inc. 1,653,600 1.5
& Luxury Goods 19,000 Nike, Inc. (Class B) 983,060 0.9
------------ ------
2,636,660 2.4
Total Common Stocks
(Cost--$97,902,141) 106,020,150 96.9
July 31, 2003, Mercury Growth Opportunity Fund
SCHEDULE OF INVESTMENTS (CONCLUDED)
In U.S. Dollars
Beneficial Interest/ Percent of
Shares Held Short-Term Securities Value Net Assets
$3,807,852 Merrill Lynch Liquidity Series, LLC
Cash Sweep Series I (a) $ 3,807,852 3.5%
$4,280,339 Merrill Lynch Liquidity Series, LLC
Money Market Series (a) (b) 4,280,339 3.9
2,853,561 Merrill Lynch Premier Institutional
Fund (a) (b) 2,853,561 2.6
Total Short-Term Securities
(Cost--$10,941,752) 10,941,752 10.0
Total Investments
(Cost--$108,843,893) 116,961,902 106.9
Liabilities in Excess of Other Assets (7,556,888) (6.9)
------------ ------
Net Assets $109,405,014 100.0%
============ ======
++Non-income producing security.
+++For Fund compliance purposes, "Industry" means any one of the
industry sub-classifications used by one or more widely recognized
market indexes or ratings group indexes, and/or as defined by Fund
management. This definition may not apply for purposes of this
report, which may combine such industry sub-classifications for
reporting ease.
(a)Investments in companies considered to be an affiliate of the
Fund (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
Dividend/
Net Interest
Affiliate Activity Income
Merrill Lynch Institutional Fund -- $ 14
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $(2,149,132) $ 24,202
Merrill Lynch Liquidity Series,
LLC Money Market Series $ 2,338,261 $ 542
Merrill Lynch Premier Institutional Fund 1,264,587 $ 351
(b)Security was purchased with the cash proceeds from securities
loans.
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
STATEMENT OF ASSETS AND
LIABILITIES
As of July 31, 2003
Assets:
Investments, at value (including securities loaned of
$6,972,185) (identified cost--$108,843,893) $ 116,961,902
Cash 213
Receivables:
Capital shares sold $ 69,362
Dividends 68,559
Interest 3,606
Securities lending--net 193 141,720
-------------
Prepaid registration fees and other assets 5,359
-------------
Total assets 117,109,194
-------------
Liabilities:
Collateral on securities loaned, at value 7,133,900
Payables:
Capital shares redeemed 263,195
Distributor 79,311
Investment adviser 65,667
Other affiliates 58,791 466,964
-------------
Accrued expenses and other liabilities 103,316
-------------
Total liabilities 7,704,180
-------------
Net Assets:
Net assets $ 109,405,014
=============
Net Assets Consist of:
Class A Shares of capital stock, $.10 par value, 6,250,000
shares authorized $ 156,670
Class B Shares of capital stock, $.10 par value, 15,000,000
shares authorized 510,554
Class C Shares of capital stock, $.10 par value, 15,000,000
shares authorized 342,454
Class I Shares of capital stock, $.10 par value, 6,250,000
shares authorized 24,196
Paid-in capital in excess of par 168,256,533
Accumulated investment loss--net $ (817,636)
Accumulated realized capital losses on investments and
foreign currency transactions--net (67,185,766)
Unrealized appreciation on investments--net 8,118,009
-------------
Total accumulated losses--net (59,885,393)
-------------
Net assets $ 109,405,014
=============
Net Asset Value:
Class A--Based on net assets of $17,149,735 and
1,566,704 shares outstanding $ 10.95
=============
Class B--Based on net assets of $53,683,782 and
5,105,536 shares outstanding $ 10.51
=============
Class C--Based on net assets of $35,898,550 and
3,424,537 shares outstanding $ 10.48
=============
Class I--Based on net assets of $2,672,947 and
241,959 shares outstanding $ 11.05
=============
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
STATEMENT OF OPERATIONS
For the Six Months Ended July 31, 2003
Investment Income:
Dividends (net of $146 foreign withholding tax) $ 445,318
Interest 24,563
Securities lending--net 907
-------------
Total income 470,788
-------------
Expenses:
Investment advisory fees $ 332,913
Account maintenance and distribution fees--Class B 255,274
Transfer agent fees--Class B 189,873
Account maintenance and distribution fees--Class C 168,955
Transfer agent fees--Class C 130,204
Transfer agent fees--Class A 47,675
Printing and shareholder reports 36,736
Accounting services 35,496
Registration fees 22,622
Account maintenance fees--Class A 19,041
Professional fees 18,539
Custodian fees 11,037
Transfer agent fees--Class I 7,377
Directors' fees and expenses 4,482
Pricing fees 1,128
Other 7,072
-------------
Total expenses 1,288,424
-------------
Investment loss--net (817,636)
-------------
Realized & Unrealized Gain (Loss) on Investments &
Foreign Currency Transactions--Net:
Realized loss on:
Investments--net (12,341,730)
Foreign currency transactions--net (952) (12,342,682)
-------------
Change in unrealized appreciation/depreciation on
investments--net 27,626,444
-------------
Total realized and unrealized gain on investments and
foreign currency transactions--net 15,283,762
-------------
Net Increase in Net Assets Resulting from Operations $ 14,466,126
=============
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
STATEMENTS OF CHANGES
IN NET ASSETS
For the Six For the
Months Ended Year Ended
July 31, January 31,
Increase (Decrease)in Net Assets: 2003 2003
Operations:
Investment loss--net $ (817,636) $ (2,211,049)
Realized losson investments and foreign currency
transactions--net (12,342,682) (22,364,392)
Change in unrealized appreciation/depreciation on
investments--net 27,626,444 (22,039,656)
------------- -------------
Net increase (decrease) in net assets resulting
from operations 14,466,126 (46,615,097)
------------- -------------
Capital Share Transactions:
Net decrease in net assets derived from capital share
transactions (5,168,500) (7,785,645)
------------- -------------
Net Assets:
Total increase (decrease) in net assets 9,297,626 (54,400,742)
Beginning of period 100,107,388 154,508,130
------------- -------------
End of period* $ 109,405,014 $ 100,107,388
============= =============
*Accumulated investment loss--net $ (817,636) --
============= =============
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
FINANCIAL HIGHLIGHTS
The following per share data and ratios have been derived from
information provided in the financial statements.
Class A+++++
For the
Six Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.49 $ 13.61 $ 17.45 $ 21.93 $ 18.51
--------- --------- --------- --------- ---------
Investment loss--net++ (.04) (.11) (.08) (.12) (.07)
Realized and unrealized gain (loss)
on investmentsand foreign
currency transactions--net 1.50 (4.01) (3.33) (1.61) 4.58
--------- --------- --------- --------- ---------
Total from investment operations 1.46 (4.12) (3.41) (1.73) 4.51
--------- --------- --------- --------- ---------
Less distributions from realized
gain on investments--net -- -- (.43) (2.75) (1.09)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.95 $ 9.49 $ 13.61 $ 17.45 $ 21.93
========= ========= ========= ========= =========
Total Investment Return:**
Based on net asset value per
share 15.38%+++ (30.27%) (19.55%) (8.57%) 24.80%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses 1.79%* 1.82% 1.56% 1.55% 1.62%
========= ========= ========= ========= =========
Investment loss--net (.88%)* (1.03%) (.58%) (.55%) (.34%)
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period
(in thousands) $ 17,150 $ 13,770 $ 11,847 $ 10,515 $ 7,659
========= ========= ========= ========= =========
Portfolio turnover 63.97% 89.63% 131.76% 100.88% 81.27%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Prior to April 3, 2000, Class A Shares were designated as Class
D Shares.
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
The following per share data and ratios have been derived from
information provided in the financial statements.
Class B
For the
Six Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.16 $ 13.25 $ 17.13 $ 21.44 $ 18.26
--------- --------- --------- --------- ---------
Investment loss--net++ (.08) (.21) (.20) (.30) (.22)
Realized and unrealized gain (loss)
on investmentsand foreign
currency transactions--net 1.43 (3.88) (3.25) (1.56) 4.48
--------- --------- --------- --------- ---------
Total from investment operations 1.35 (4.09) (3.45) (1.86) 4.26
--------- --------- --------- --------- ---------
Less distributions from realized
gain on investments--net -- -- (.43) (2.45) (1.08)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.51 $ 9.16 $ 13.25 $ 17.13 $ 21.44
========= ========= ========= ========= =========
Total Investment Return:**
Based on net asset value per
share 14.74%+++ (30.87%) (20.16%) (9.31%) 23.76%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses 2.66%* 2.65% 2.39% 2.36% 2.45%
========= ========= ========= ========= =========
Investment loss--net (1.74%)* (1.87%) (1.42%) (1.38%) (1.16%)
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period
(in thousands) $ 53,684 $ 50,933 $ 85,072 $ 109,589 $ 115,216
========= ========= ========= ========= =========
Portfolio turnover 63.97% 89.63% 131.76% 100.88% 81.27%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
FINANCIAL HIGHLIGHTS (CONTINUED)
The following per share data and ratios have been derived from
information provided in the financial statements.
Class C
For the
Six Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.13 $ 13.21 $ 17.09 $ 21.40 $ 18.24
--------- --------- --------- --------- ---------
Investment loss--net++ (.08) (.21) (.20) (.30) (.23)
Realized and unrealized gain (loss)
on investmentsand foreign
currency transactions--net 1.43 (3.87) (3.25) (1.56) 4.47
--------- --------- --------- --------- ---------
Total from investment operations 1.35 (4.08) (3.45) (1.86) 4.24
--------- --------- --------- --------- ---------
Less distributions from realized
gain on investments--net -- -- (.43) (2.45) (1.08)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.48 $ 9.13 $ 13.21 $ 17.09 $ 21.40
========= ========= ========= ========= =========
Total Investment Return:**
Based on net asset value per
share 14.79%+++ (30.89%) (20.20%) (9.34%) 23.68%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses 2.69%* 2.68% 2.42% 2.38% 2.48%
========= ========= ========= ========= =========
Investment loss--net (1.77%)* (1.90%) (1.44%) (1.41%) (1.20%)
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period
(in thousands) $ 35,898 $ 33,258 $ 55,039 $ 69,476 $ 72,650
========= ========= ========= ========= =========
Portfolio turnover 63.97% 89.63% 131.76% 100.88% 81.27%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
FINANCIAL HIGHLIGHTS (CONCLUDED)
The following per share data and ratios have been derived from
information provided in the financial statements.
Class I+++++
For the
Six Months
Ended
Increase (Decrease) in July 31, For the Year Ended January 31,
Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance:
Net asset value, beginning of
period $ 9.57 $ 13.69 $ 17.49 $ 22.01 $ 18.53
--------- --------- --------- --------- ---------
Investment loss--net++ (.03) (.09) (.05) (.05) (.01)
Realized and unrealized gain (loss)
on investmentsand foreign
currency transactions--net 1.51 (4.03) (3.32) (1.64) 4.58
--------- --------- --------- --------- ---------
Total from investment operations 1.48 (4.12) (3.37) (1.69) 4.57
--------- --------- --------- --------- ---------
Less distributions from realized gain
on investments--net -- -- (.43) (2.83) (1.09)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.05 $ 9.57 $ 13.69 $ 17.49 $ 22.01
========= ========= ========= ========= =========
Total Investment Return:**
Based on net asset value per
share 15.46%+++ (30.09%) (19.27%) (8.37%) 25.11%
========= ========= ========= ========= =========
Ratios to Average Net Assets:
Expenses 1.54%* 1.56% 1.30% 1.31% 1.36%
========= ========= ========= ========= =========
Investment loss--net (.63%)* (.77%) (.33%) (.25%) (.07%)
========= ========= ========= ========= =========
Supplemental Data:
Net assets, end of period
(in thousands) $ 2,673 $ 2,146 $ 2,550 $ 2,142 $ 939
========= ========= ========= ========= =========
Portfolio turnover 63.97% 89.63% 131.76% 100.88% 81.27%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Prior to April 3, 2000, Class I Shares were designated as Class
A Shares.
See Notes to Financial Statements.
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Mercury Growth Opportunity Fund (the "Fund") is a series of The
Asset Program, Inc. (the "Program"), which is registered under the
Investment Company Act of 1940, as amended, as a non-diversified,
open-end management investment company. The Fund's financial
statements are prepared in conformity with accounting principles
generally accepted in the United States of America, which may
require the use of management accruals and estimates. These
unaudited financial statements reflect all adjustments, which are,
in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal, recurring nature. The Fund offers multiple classes of
shares. Class A and Class I Shares are sold with a front-end sales
charge. Class B and Class C Shares 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 A, Class B and Class C 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 (except that Class B shareholders may
vote upon any material changes under the distribution plan for Class
A Shares). Income, expenses (other than expenses attributable to a
specific class) and realized and unrealized gains and losses on
investments and foreign currency transactions are allocated daily to
each class based on its relative net assets. 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 or the Nasdaq National Market are valued at the
last sale price or official closing 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 for long positions, and at the last available
ask price for short positions. 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 Program's 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 financial futures contracts and
related options, are stated at market value. Securities and assets
for which market quotations are not readily available are valued at
fair market value as determined in good faith by or under the
direction of the Program's Board of Directors. Occasionally, events
affecting the values of securities and other assets may occur
between the times at which valuations of such securities are
determined (that is, close of the market on which such securities
trade) and the close of business on the NYSE. If events (for
example, company announcement, natural disasters, market volatility)
occur during such periods that are expected to materially affect the
value for such securities, those securities may be valued at their
fair market value as determined in good faith by the Program's Board
of Directors or by the investment adviser using a pricing service
and/or procedures approved by the Board of Directors of the Program.
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(b) Repurchase agreements--The Fund may invest in securities
pursuant to repurchase agreements. Under such agreements, the
counterparty agrees to repurchase the security at a mutually agreed
upon time and price. The Fund takes possession of the underlying
securities, marks to market such securities and, if necessary,
receives additions to such securities daily to ensure that the
contract is fully collateralized. If the counterparty defaults and
the fair value of the collateral declines, liquidation of the
collateral by the Fund may be delayed or limited.
(c) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies both to increase the return of the
Fund and to hedge, or protect, its exposure to interest rate
movement and movements in the securities 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.
Futures contracts are contracts for delayed delivery of securities
at a specific future date and at a specific price or yield. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
* Options--The Fund is authorized to purchase and write call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current 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).
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Written and purchased options are non-income producing investments.
* 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. The contract is
marked-to-market daily and the change in market value is recorded by
the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference
between the value 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-U.S. 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.
(d) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into U.S. dollars. Realized and unrealized gains or
losses from investments include the effects of foreign exchange
rates on investments.
(e) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends and capital
gains at various rates.
(f) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. 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 premium and
discount) is recognized on the accrual basis.
(g) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(h) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(i) Expenses--Certain expenses have been allocated to the individual
Funds in the Program on a pro rata basis based upon the respective
aggregate net asset value of each Fund included in the Program.
(j) Securities lending--The Fund may lend securities to financial
institutions that provide cash or securities issued or guaranteed by
the U.S. government as collateral, which will be maintained at all
times in an amount equal to at least 100% of the current market
value of the loaned securities. The market value of the loaned
securities is determined at the close of business of the Fund and
any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral
for the loaned securities, it collects a fee from the borrower. The
Fund typically receives the income on the loaned securities but does
not receive the income on the collateral. Where the Fund receives
cash collateral, it may invest such collateral and retain the amount
earned on such investment, net of any amount rebated to the
borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities
within five business days. The Fund may pay reasonable finder's,
lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation
to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access
to the collateral. The Fund also could suffer a loss where the value
of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of
losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM 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 FAM Distributors, Inc. ("FAMD"
or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolios 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 .65%, on an annual basis,
of the average daily value of the Fund's net assets. FAM has entered
into a Sub-Advisory Agreement with Merrill Lynch Asset Management
U.K. Limited ("MLAM U.K."), an affiliate of FAM, pursuant to which
MLAM U.K. provides investment advisory services to FAM with respect
to the Fund. There is no increase in the aggregate fees paid by the
Fund for these services.
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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
Maintenance Distribution
Fees Fees
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Pursuant to a sub-agreement with the Distributor, selected dealers
also provide account maintenance and distribution services to the
Program. The ongoing account maintenance fee compensates the
Distributor and selected dealers for providing account maintenance
services to Class A, Class B and Class C shareholders. The ongoing
distribution fee compensates the Distributor and selected dealers
for providing shareholder and distribution-related services to Class
B and Class C shareholders.
For the six months ended July 31, 2003, FAMD earned underwriting
discounts and Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), a subsidiary of ML & Co., earned dealer concessions on
sales of the Fund's Class A Shares as follows:
FAMD MLPF&S
Class A $99 $1,807
For the six months ended July 31, 2003, MLPF&S, received contingent
deferred sales charges of $47,299 and $3,078 relating to
transactions in Class B and Class C Shares, respectively.
The Fund has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
MLPF&S or its affiliates. As of July 31, 2003, the Fund lent
securities with a value of $4,793,185 to MLPF&S or its affiliates.
Pursuant to that order, the Fund also has retained Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as the
securities lending agent for a fee based on a share of the returns
on investment of cash collateral. MLIM, LLC may, on behalf of the
Fund, invest cash collateral received by the Fund for such loans,
among other things, in a private investment company managed by MLIM,
LLC or in registered money market funds advised by FAM or its
affiliates. For the six months ended July 31, 2003, MLIM, LLC
received $389 in securities lending agent fees.
In addition, MLPF&S received $35,253 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended July 31, 2003.
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the six months ended July 31, 2003, the Fund reimbursed FAM
$1,214 for certain accounting services.
Certain officers and/or directors of the Program are officers and/or
directors of FAM, MLIM, LLC, PSI, MLAM U.K., FDS, FAMD, and/or
ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended July 31, 2003 were $63,638,572 and
$67,647,207, respectively.
Net realized losses for the six months ended July 31, 2003 and net
unrealized gains as of July 31, 2003 were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (12,341,730) $ 8,118,009
Foreign currency transactions (952) --
--------------- ---------------
Total $ (12,342,682) $ 8,118,009
=============== ===============
As of July 31, 2003, net unrealized appreciation for Federal income
tax purposes aggregated $7,532,061, of which $11,079,989 related to
appreciated securities and $3,547,928 related to depreciated
securities. At July 31, 2003, the aggregated cost of investments for
Federal income tax purposes was $109,429,841.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $5,168,500 and $7,785,645 for the six months ended July 31, 2003
and the year ended January 31, 2003, respectively.
Class A Shares for the Six Months Dollar
Ended July 31, 2003 Shares Amount
Shares sold 279,391 $ 2,791,512
Automatic conversion of shares 38,347 386,261
--------------- ---------------
Total issued 317,738 3,177,773
Shares redeemed (201,861) (2,037,893)
--------------- ---------------
Net increase 115,877 $ 1,139,880
=============== ===============
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Class A Shares for the Year Dollar
Ended January 31, 2003 Shares Amount
Shares sold 1,485,692 $ 16,258,841
Automatic conversion of shares 49,360 591,112
--------------- ---------------
Total issued 1,535,052 16,849,953
Shares redeemed (954,462) (10,168,923)
--------------- ---------------
Net increase 580,590 $ 6,681,030
=============== ===============
Class B Shares for the Six Months Dollar
Ended July 31, 2003 Shares Amount
Shares sold 132,643 $ 1,276,985
Automatic conversion of shares (39,830) (386,261)
Shares redeemed (549,850) (5,280,762)
--------------- ---------------
Net decrease (457,037) $ (4,390,038)
=============== ===============
Class B Shares for the Year Dollar
Ended January 31, 2003 Shares Amount
Shares sold 470,713 $ 5,262,975
Automatic conversion of shares (50,892) (591,112)
Shares redeemed (1,280,011) (13,902,091)
--------------- ---------------
Net decrease (860,190) $ (9,230,228)
=============== ===============
Class C Shares for the Six Months Dollar
Ended July 31, 2003 Shares Amount
Shares sold 174,297 $ 1,679,240
Shares redeemed (392,585) (3,776,621)
--------------- ---------------
Net decrease (218,288) $ (2,097,381)
=============== ===============
Class C Shares for the Year Dollar
Ended January 31, 2003 Shares Amount
Shares sold 454,865 $ 5,090,933
Shares redeemed (978,343) (10,750,899)
--------------- ---------------
Net decrease (523,478) $ (5,659,966)
=============== ===============
Class I Shares for the Six Months Dollar
Ended July 31, 2003 Shares Amount
Shares sold 42,825 $ 429,602
Shares redeemed (25,169) (250,563)
--------------- ---------------
Net increase 17,656 $ 179,039
=============== ===============
July 31, 2003, Mercury Growth Opportunity Fund
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
Class I Shares for the Year Dollar
Ended January 31, 2003 Shares Amount
Shares sold 106,248 $ 1,208,046
Shares redeemed (68,304) (784,527)
--------------- ---------------
Net increase 37,944 $ 423,519
=============== ===============
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by FAM and its
affiliates, is a party to a $500,000,000 credit agreement with Bank
One, N.A. and certain other lenders. The Fund may borrow under the
credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Fund may borrow up to
the maximum amount allowable under the Fund's current prospectus and
statement of additional information, subject to various other legal,
regulatory or contractual limits. The Fund pays a commitment fee of
..09% per annum based on the Fund's pro rata share of the unused
portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election,
the Federal Funds rate plus .50% or a base rate as determined by
Bank One, N.A. On November 29, 2002, the credit agreement was
renewed for one year under the same terms, except that the total
commitment was reduced from $1,000,000,000 to $500,000,000. The Fund
did not borrow under the credit agreement during the six months
ended July 31, 2003.
6. Capital Loss Carryforward:
On January 31, 2003, the Fund had a net capital loss carryforward of
$52,615,781, of which $28,654,300 expires in 2009 and $23,961,481
expires in 2010. This amount will be available to offset like
amounts of any future taxable gains.
7. Reorganization Plan:
On August 14, 2003, the Fund's Board of Directors approved a plan of
reorganization, subject to shareholder approval and certain other
conditions, whereby Merrill Lynch Fundamental Growth Fund, Inc. will
acquire all of the assets and will assume all of the liabilities of
the Fund in exchange for newly issued shares of Merrill Lynch
Fundamental Growth Fund, Inc.
July 31, 2003, Mercury Growth Opportunity Fund
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
James H. Bodurtha, Director
Joe Grills, Director
Herbert I. London, Director
Andre F. Perold, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Stephen B. Swensrud, Director
Robert C. Doll Jr., Senior Vice President
Lawrence R. Fuller, Vice President and
Portfolio Manager
Donald C. Burke, Vice President and
Treasurer
Phillip S. Gillespie, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
888-763-2260
July 31, 2003, Mercury Growth Opportunity Fund