UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-7177
Name of Fund: Merrill Lynch Mid Cap Value Fund of The Asset
Program, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch Mid Cap Value Fund, 800 Scudders Mill Road,
Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton,
NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 01/31/04
Date of reporting period: 02/01/03 - 07/31/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
Mid Cap Value Fund
Semi-Annual Report
July 31, 2003
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.
Merrill Lynch Mid Cap Value Fund,
A Series of The Asset Program, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Mid Cap Value Fund
Portfolio Information As of July 31, 2003
Percent of
Ten Largest Equity Holdings Net Assets
Northrop Grumman Corporation 2.5%
Convergys Corporation 2.5
Tech Data Corporation 2.3
Protective Life Corporation 2.1
Parametric Technology Corporation 2.1
Raytheon Company 2.0
CNF Transportation Inc. 2.0
McKesson HBOC, Inc. 2.0
Cendant Corporation 2.0
Banknorth Group, Inc. 1.9
Percent of
Five Largest Industries* Net Assets
Diversified Financial Services 8.6%
IT Services 5.3
Aerospace & Defense 4.5
Commercial Banks 4.3
Health Care Providers & Services 4.3
*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.
Electronic Delivery
The Fund is now offering electronic delivery of communications
to its shareholders. In order to receive this service, you
must register your account and provide us with e-mail information.
To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions. When
you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
A Letter From the President
Dear Shareholder
Now more than half behind us, 2003 has been a meaningful year in
many respects. After three agonizing years for equity markets, we
finally saw hopeful signs for a sustained economic recovery and an
accompanying market upturn.
The most significant development through July 31 was the conclusion
of all-out war in Iraq. As combat gave way to restructuring, oil
prices dropped. At the same time, credit spreads tightened and the
spring brought some of the most promising months for equities since
last October. Many companies began to show improving earnings, and
consumer confidence strengthened. Although oil prices have since
returned to higher levels, economic recovery remains a high priority
for the President, Congress and the Federal Reserve Board--all of
whom have taken steps aimed at reviving the economy and drawing
investors back to the markets.
The events and efforts of the past several months appear to have
made an impression on investors and the markets. While both the S&P
500 Index and Nasdaq were in negative territory for the six-month
period ended January 31, 2003, both indexes rebounded dramatically
over the six months that followed. From January 31, 2003 to July 31,
2003, the S&P 500 Index and Nasdaq returned +16.79% and +31.35%,
respectively.
Against this backdrop, our portfolio managers continued to work
diligently to deliver on our commitment to provide superior
performance within reasonable expectations for risk and return. This
included striving to outperform our peers and the market indexes.
With that said, remember also that the advice and guidance of a
skilled financial advisor can mean the difference between fruitful
and fruitless investing. A financial professional can help you
choose those investments that will best serve you as you plan for
your financial future.
Finally, I am proud to premiere a new look to our shareholder
communications. Our portfolio manager commentaries have been trimmed
and organized in such a way that you can get the information you
need at a glance, in plain language. Today's markets are confusing
enough. We want to help you put it all in perspective. The report's
new size also allows us certain mailing efficiencies. The cost
savings in both production and postage are passed on to the fund
and, ultimately, to fund shareholders.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
A Discussion With Your Fund's Portfolio Manager
We believe there were essentially two components needed during this
six-month period to perform well: smaller companies and higher-beta
stocks. Merrill Lynch Mid Cap Value Fund had both, and this
contributed to its outperformance.
How did the Fund perform during the period, relative to its
benchmark and its mutual fund peer group?
For the six-month period ended July 31, 2003, Merrill Lynch Mid Cap
Value Fund's Class A, Class B, Class C and Class I Shares had total
returns of +22.21%, +21.76%, +21.72% and +22.37%, respectively. The
Fund outperformed the +19.91% return of the unmanaged benchmark S&P
MidCap 400 Index and the +20.97% average return of the Lipper Mid
Cap Value Funds 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
6 - 8 of this report to shareholders.)
What were the major economic and market developments that affected
the Fund during the period?
Importantly, economic growth accelerated during the period. Several
economic statistics supported this. Retail sales improved, durable
goods orders increased, and gross domestic product advanced. The
stronger the recovery, the better it usually is for small- and mid-
cap stocks. During the six-month period investors favored smaller
companies because they are more economically sensitive. Small- and
mid-cap stocks historically have performed well in an economic
recovery. As economic conditions improved during the period, small-
and mid-cap stocks performed favorably. The unmanaged Russell 3000
Index returned +18.18% for the six-month period, while the unmanaged
Russell 2000 Index, which measures the performance of the 2,000
smallest companies in the Russell 3000, returned to +28.82%.
Investors also gravitated to more speculative areas of the market,
including technology, biotechnology, and Internet stocks. Earlier
this year, we had exposure to these areas because the stocks then
ranked favorably on our evaluation criteria, and the Fund benefited
from holdings in higher-beta issues during the six-month period.
What were the primary reasons for the Fund's outperformance during
the period?
Stock selection in the technology, financial services and consumer
discretionary sectors contributed favorably to performance during
the period. Our holdings in information technology were particularly
strong, with the Fund's technology investments up more than 40%
during the period, compared to the benchmark's technology stocks,
which returned about 28%.
The leading contributor to Fund performance during the period was
our investment in Cendant Corporation, a provider of travel and
leisure services, largely over the Internet. Travel-related stocks
performed well in the six-month period, and the Fund's holdings in
this area provided favorable returns. Cendant's mortgage business
also benefited from the low interest rate environment, and its
operations in the rental car business improved. Knight Trading
Group, Inc., a market maker in NASDAQ and over-the-counter
securities, was the second-leading performer for the Fund. Its
business benefited as investors started to return to the stock
market. With new management in place, Knight's revenue growth was
greater than anticipated and earnings exceeded expectations. Symbol
Technologies, a provider of mobile technology solutions, also
contributed significantly to Fund performance. We recently
eliminated the portfolio's position in Symbol based on management
departures and concerns about the outlook for the remainder of the
year.
Health care stocks performed well during the period, therefore the
Fund's underweight position in the sector detracted from performance
somewhat. Our portfolio exposure to health care averaged about 11%
compared to 13% for the benchmark. The Fund's cash position also
hindered results in a sharply rising equity environment. The Fund
held an average of about 5% in cash for the period.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
What changes did you make to the portfolio during the period?
We reduced the Fund's exposure to information technology stocks,
because we believe current prices already reflect a significant
improvement in end-market demand. When stocks exceed our price
objectives, we generally trim them and deploy the cash into areas
where we believe there is greater upside opportunity. We adjusted
the Fund's technology exposure away from software holdings and
toward a more balanced mix of hardware stocks, technology
distributors and computer services companies. Tech Data Corporation,
a full-line distributor of technology products, became the
portfolio's largest technology position. On balance, however, the
portfolio's technology exposure was reduced from the levels
maintained at the beginning of the period.
Proceeds from the sale of technology stocks were primarily invested
in the consumer discretionary sector. We believe the current low
interest rate environment, coupled with President Bush's tax
stimulus, should help sustain consumer spending. In keeping with
this view, we added to several consumer discretionary positions,
including Federated Department Stores, Inc., The Limited, Inc.,
American Eagle Outfitters, Inc. and J.C. Penney Company, Inc. New
positions included Abercrombie & Fitch Co., a retailer of teen
apparel, and Darden Restaurants, Inc., an owner and operator of
casual dining restaurants.
We made a number of changes to the portfolio's health care holdings.
We moved the Fund's positioning away from biotechnology stocks that
worked so well during the first half, and transitioned into other
health care names where we believe there are more visible earnings
prospects. We added to the Fund's position in medical device company
C.R. Bard, Inc., and initiated a position in King Pharmaceuticals,
Inc. We also added to health care distributor McKesson HBOC, Inc.,
which performed well during the period and presently represents one
of the Fund's ten largest positions.
In general, the most important portfolio change has been a move away
from higher-beta names toward a more balanced and defensive stance.
While the equity market rally in the first half of the year was
focused on high-beta companies that have yet to show a profit, we
believe further market gains are likely to include established
companies with more predictable earnings. We maintain a favorable
view of the market, but anticipate greater breadth and less emphasis
on small, speculative stocks. Accordingly, we have moved the Fund
"up-cap" to take advantage of this anticipated shift in investor
sentiment.
How would you characterize the portfolio's position at the close of
the period?
We believe Merrill Lynch Mid Cap Value Fund is well balanced between
early-stage and more-established companies. At the start of the
Fund's fiscal year, we were significantly overweight in technology
and some of the higher-beta stocks. We have since reined in these
exposures and the Fund's current position is more neutral relative
to the S&P MidCap 400 Index. We believe further gains in the market
are likely to encompass larger-cap companies and those areas that
have lagged on a year-to-date basis.
R. Elise Baum
Vice President and Portfolio Manager
August 27, 2003
Effective April 14, 2003, the share class names for the Merrill
Lynch family of mutual funds were changed to be consistent with the
standard share classes of most other mutual fund families. As of
that date, all Class A Shares were redesignated Class I Shares. At
the same time, Class D Shares were redesignated Class A Shares.
There are no changes to the Class B or Class C share class labels.
Trading symbols have not changed nor have current eligibility rules
or pricing structures. This redesignation of share classes does not
impact your investment in any way.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I
Shares and Class D Shares were redesignated Class A Shares.
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* Class A Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
* Effective June 1, 2001, Class B Shares are subject to a maximum
contingent deferred sales charge of 4% declining to 0% after 6
years. All Class B Shares purchased prior to June 1, 2001 will
maintain the four-year schedule. 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. (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 I Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible
investors.
* Class R Shares do not incur a maximum sales charge (front-end
load) or deferred sales charge. These shares are subject to a
distribution fee of 0.25% and an account maintenance fee of 0.25%.
Class R Shares are available only to certain retirement plans.
None of the past results shown should be considered a representation
of future performance. Performance results do not include 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.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Performance Data (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 7/31/03 +16.80% +10.66%
Five Years Ended 7/31/03 + 7.06 + 5.91
Inception (2/01/95) through 7/31/03 +11.59 +10.88
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 7/31/03 +15.83% +11.83%
Five Years Ended 7/31/03 + 6.17 + 5.85
Inception (2/01/95) through 7/31/03 +10.66 +10.66
*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 CDSC With CDSC**
Class C Shares*
One Year Ended 7/31/03 +15.87% +14.87%
Five Years Ended 7/31/03 + 6.15 + 6.15
Inception (2/01/95) through 7/31/03 +10.64 +10.64
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class I Shares*
One Year Ended 7/31/03 +17.17% +11.02%
Five Years Ended 7/31/03 + 7.33 + 6.18
Inception (2/01/95) through 7/31/03 +11.86 +11.15
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Aggregate Total Return
% Return Without
Sales Charge
Class R Shares
Inception (2/04/03) through 7/31/03 +23.54%
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Performance Data (concluded)
Recent Performance Results
6-Month 12-Month Since Inception
As of July 31, 2003 Total Return Total Return Total Return
ML Mid Cap Value Fund--Class A Shares* +22.21% +16.80% +153.75%
ML Mid Cap Value Fund--Class B Shares* +21.76 +15.83 +136.36
ML Mid Cap Value Fund--Class C Shares* +21.72 +15.87 +136.02
ML Mid Cap Value Fund--Class I Shares* +22.37 +17.17 +159.05
ML Mid Cap Value Fund--Class R Shares* -- -- + 23.54
S&P MidCap 400 Index** +19.91 +13.85 +223.09/+21.09
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's since inception periods are from 2/01/95 for Class A, Class
B, Class C & Class I Shares and from 2/04/03 for Class R Shares.
**This widely recognized, unmanaged Index measures the performance
of the mid-size company segment of the U.S. market. Since inception
total returns are from 2/01/95 and from 2/04/03, respectively.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Schedule of Investments
NORTH Value Percent of
AMERICA Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
Canada Auto Components 28,500 Magna International, Inc. (Class A) $ 2,168,280 0.7%
Total Common Stocks in Canada 2,168,280 0.7
United States Aerospace & Defense 85,900 Northrop Grumman Corporation 7,923,416 2.5
209,500 Raytheon Company 6,431,650 2.0
--------------- ------
14,355,066 4.5
Air Freight & 228,200 CNF Transportation Inc. 6,355,370 2.0
Logistics
Beverages 181,300 Coca-Cola Enterprises Inc. 3,091,165 1.0
46,200 The Pepsi Bottling Group, Inc. 1,015,476 0.3
--------------- ------
4,106,641 1.3
Biotechnology 98,100 ++Applera Corporation--Celera Genomics Group 986,886 0.3
39,500 ++IDEC Pharmaceuticals Corporation 1,336,680 0.4
138,800 ++Maxygen Inc. 2,030,644 0.6
60,900 ++Medarex, Inc. 338,604 0.1
72,298 ++Millennium Pharmaceuticals, Inc. 908,063 0.3
64,000 ++Vertex Pharmaceuticals Incorporated 927,360 0.3
--------------- ------
6,528,237 2.0
Building Products 108,900 Masco Corporation 2,653,893 0.8
Capital Markets 226,000 Janus Capital Group Inc. 3,955,000 1.2
631,100 ++Knight Trading Group, Inc. 5,578,924 1.8
--------------- ------
9,533,924 3.0
Commercial Banks 225,400 Banknorth Group, Inc. 6,221,040 1.9
34,304 Charter One Financial, Inc. 1,115,566 0.3
83,800 Compass Bancshares, Inc. 2,831,602 0.9
130,075 First Midwest Bancorp, Inc. 3,894,445 1.2
--------------- ------
14,062,653 4.3
Commercial Services 346,900 ++Cendant Corporation 6,226,855 2.0
& Supplies 171,300 ++Valassis Communications, Inc. 4,849,503 1.5
--------------- ------
11,076,358 3.5
Computers & 1,700 ++NETGEAR, Inc. 30,041 0.0
Peripherals
Construction & 46,600 Fluor Corporation 1,660,358 0.5
Engineering
Construction 111,300 Martin Marietta Materials, Inc. 4,262,790 1.3
Materials
Containers & 246,700 ++Smurfit-Stone Container Corporation 3,693,099 1.2
Packaging
Diversified 37,400 DIAMONDS Trust, Series I (d) 3,455,386 1.1
Financial Services 229,800 Financial Select Sector SPDR Fund (h) 5,887,476 1.8
94,300 ++Nasdaq-100 Shares (g) 2,995,911 0.9
29,200 Oil Service HOLDRs Trust (c) 1,626,440 0.5
58,700 S&P 500 Depositary Receipts (e) 5,830,084 1.8
65,200 S&P Mid-Cap 400 Depositary Receipts (b) 5,923,420 1.9
100,100 Technology Select Sector SPDR (f) 1,760,759 0.6
--------------- ------
27,479,476 8.6
Electric Utilities 95,200 Cinergy Corp. 3,238,704 1.0
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Schedule of Investments (continued)
NORTH AMERICA Value Percent of
(continued) Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
United States Electronic Equipment 1,700 ++Digital Theater Systems Inc. $ 35,700 0.0%
(continued) & Instruments 230,800 ++Tech Data Corporation 7,224,040 2.3
--------------- ------
7,259,740 2.3
Energy Equipment 47,000 ++BJ Services Company 1,609,750 0.5
& Service 144,900 Diamond Offshore Drilling, Inc. 2,819,754 0.9
163,600 Halliburton Company 3,627,012 1.1
--------------- ------
8,056,516 2.5
Food Products 351,595 Archer-Daniels-Midland Company 4,619,958 1.4
439,900 ++Del Monte Foods Company 3,849,125 1.2
234,100 ++Smithfield Foods, Inc. 4,986,330 1.6
--------------- ------
13,455,413 4.2
Health Care 50,900 Bausch & Lomb Incorporated 2,151,543 0.7
Equipment & Supplies 136,800 Becton, Dickinson and Company 5,010,984 1.6
58,200 C.R. Bard, Inc. 3,990,192 1.2
--------------- ------
11,152,719 3.5
Health Care 197,000 McKesson HBOC, Inc. 6,355,220 2.0
Providers & Services 9,500 ++Molina Healthcare Inc. 225,150 0.1
167,100 ++Quintiles Transnational Corp. 2,297,625 0.7
397,300 ++WebMD Corporation 4,799,384 1.5
--------------- ------
13,677,379 4.3
Hotels, Restaurants 169,900 Darden Restaurants, Inc. 3,178,829 1.0
& Leisure 70,100 ++MGM Mirage Inc. 2,404,430 0.7
69,100 Outback Steakhouse, Inc. 2,580,885 0.8
53,300 ++YUM! Brands, Inc. 1,595,269 0.5
--------------- ------
9,759,413 3.0
Household Durables 49,400 Clayton Homes, Inc. 616,018 0.2
IT Services 101,600 ++Computer Sciences Corporation 4,121,912 1.3
469,100 ++Convergys Corporation 7,913,717 2.5
188,000 ++Sungard Data Systems Inc. 4,933,120 1.5
--------------- ------
16,968,749 5.3
Insurance 133,100 ACE Limited 4,390,969 1.4
235,400 Protective Life Corporation 6,859,556 2.1
--------------- ------
11,250,525 3.5
Internet Software & 338,500 ++EarthLink, Inc. 2,589,525 0.8
Services 2,600 ++iPass Inc. 47,320 0.0
2,374,800 ++Vignette Corporation 5,034,576 1.6
--------------- ------
7,671,421 2.4
Machinery 46,800 Eaton Corporation 3,939,156 1.3
54,000 ITT Industries, Inc. 3,601,800 1.1
--------------- ------
7,540,956 2.4
Media 44,800 Harte-Hanks, Inc. 860,608 0.3
58,700 Knight Ridder, Inc. 4,028,581 1.2
581,900 ++Paxson Communications Corporation 2,892,043 0.9
274,000 The Reader's Digest Association, Inc. (Class A) 3,556,520 1.1
--------------- ------
11,337,752 3.5
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Schedule of Investments (continued)
NORTH AMERICA Value Percent of
(concluded) Industry* Shares Held Common Stocks (in U.S. dollars) Net Assets
United States Multiline Retail 30,200 ++Dollar Tree Stores, Inc. $ 1,107,736 0.3%
(concluded) 152,900 Federated Department Stores, Inc. 6,117,529 1.9
307,800 J.C. Penney Company, Inc. 5,718,924 1.8
--------------- ------
12,944,189 4.0
Oil & Gas 86,400 Noble Energy, Inc. 3,153,600 1.0
77,100 Sunoco, Inc. 2,852,700 0.9
115,700 Unocal Corporation 3,388,853 1.0
--------------- ------
9,395,153 2.9
Pharmaceuticals 170,300 ++King Pharmaceuticals, Inc. 2,564,718 0.8
77,600 Medicis Pharmaceutical (Class A) 4,531,840 1.4
--------------- ------
7,096,558 2.2
Real Estate 73,100 ++Corrections Corporation of America 1,803,377 0.6
Road & Rail 93,100 CSX Corporation 2,914,030 0.9
Semiconductors & 180,200 ++Applied Micro Circuits Corporation 1,032,546 0.3
Semiconductor
Equipment
Software 274,000 ++Compuware Corporation 1,411,100 0.5
6,800 ++InterVideo Inc. 138,584 0.0
2,100,400 ++Parametric Technology Corporation 6,700,276 2.1
554,700 ++TIBCO Software Inc. 2,978,739 0.9
--------------- ------
11,228,699 3.5
Specialty Retail 203,000 ++American Eagle Outfitters, Inc. 4,498,480 1.4
39,500 CDW Corporation 1,891,260 0.6
309,380 The Limited, Inc. 5,169,740 1.6
77,600 ++Linens 'n Things, Inc. 2,075,800 0.7
--------------- ------
13,635,280 4.3
Textiles, Apparel & 55,500 ++Abercrombie & Fitch Co. (Class A) 1,780,995 0.6
Luxury Goods
Thrifts & Mortgage 307,800 Sovereign Bancorp, Inc. 5,521,932 1.7
Finance
Total Common Stocks in the United States 295,135,970 92.1
Total Common Stocks in North America 297,304,250 92.8
WESTERN EUROPE
Switzerland Biotechnology 90,100 Serono SA (ADR)(a) 1,463,224 0.5
Total Common Stocks in Switzerland 1,463,224 0.5
United Kingdom Pharmaceuticals 103,100 ++Shire Pharmaceuticals Group PLC (ADR)(a) 2,415,633 0.7
Total Common Stocks in the United Kingdom 2,415,633 0.7
Total Common Stocks in Western Europe 3,878,857 1.2
Total Common Stocks (Cost--$279,897,857) 301,183,107 94.0
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Schedule of Investments (concluded)
Beneficial Interest/ Value Percent of
Shares Held Short-Term Securities (in U.S. dollars) Net Assets
$24,143,048 Merrill Lynch Liquidity Series, LLC Cash Sweep $ 24,143,048 7.5%
Series I (I)
$45,985,380 Merrill Lynch Liquidity Series, LLC Money 45,985,380 14.3
Market Series (i)(j)
30,656,920 Merrill Lynch Premier Institutional Fund (i)(j) 30,656,920 9.6
Total Short-Term Securities
(Cost--$100,785,348) 100,785,348 31.4
Total Investments (Cost--$380,683,205) 401,968,455 125.4
Liabilities in Excess of Other Assets (81,525,535) (25.4)
--------------- ------
Net Assets $ 320,442,920 100.0%
--------------- ------
++Non-income producing security.
*For Fund compliance purposes, "Industry" 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.
(a)American Depositary Receipts (ADR).
(b)Represents ownership in MidCap SPDR Trust Series I, a registered
unit investment trust. The investment objective of the MidCap SPDR
Trust Series I is to provide investment results that generally
correspond to the price performance and dividend yield of the
component stocks of the S&P MidCap 400 Index.
(c)Represents ownership in Oil Services HOLDRs Trust. The Oil
Services HOLDRs Trust holds shares of common stock issued by 20
specified companies generally considered to be involved in various
segments of the oil service industry.
(d)Represents ownership in DIAMONDS Trust Series I. The DIAMONDS
Trust Series I holds shares of common stock issued by all 30
companies in the Dow Jones Industrial Average.
(e)Represents ownership in SPDR Trust Series I, a registered unit
investment trust. The investment objective of the SPDR Trust Series
I is to provide investment results that generally correspond to the
price performance and dividend yield of the component stocks of the
S&P 500 Index.
(f)Represents ownership in Technology Select Sector SPDR Fund,
registered in the United States. The investment objective of the
Technology Select Sector SPDR Fund is to provide investment results
that before expenses, corresponds to the performance of The
Technology Select Sector Index.
(g)Represents ownership in the Nasdaq-100 Trust, a registered unit
investment trust. The investment objective of the Nasdaq-100 Trust
is to provide investment results that generally correspond to the
price performance and dividend yield of the component stocks of the
Nasdaq-100 Index.
(h)Represents ownership in Financial Select Sector SPDR Fund,
registered in the United States. The investment objective of the
Financial Select Sector SPDR Fund is to provide investment results
that correspond to the performance of The Financial Select Sector
Index.
(i)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 -- $ 466
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $11,093,962 $122,044
Merrill Lynch Liquidity Series,
LLC Money Market Series $26,239,169 $ 11,757
Merrill Lynch Premier
Institutional Fund 14,500,930 $ 7,315
(j)Security was purchased with the cash proceeds from securities
loans.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Statement of Assets and Liabilities
As of July 31, 2003
Assets
Investments, at value (including securities loaned of $74,345,942)
(identified cost--$380,683,205) $ 401,968,455
Receivables:
Securities sold $ 2,168,454
Capital shares sold 538,637
Dividends 268,663
Interest 20,799
Securities lending--net 4,030 3,000,583
---------------
Prepaid registration fees 38,792
---------------
Total assets 405,007,830
---------------
Liabilities
Collateral on securities loaned, at value 76,642,300
Payables:
Securities purchased 5,759,172
Custodian bank 928,218
Capital shares redeemed 622,292
Investment adviser 192,291
Other affiliates 190,835
Distributor 157,938 7,850,746
---------------
Accrued expenses and other liabilities 71,864
---------------
Total liabilities 84,564,910
---------------
Net Assets
Net assets $ 320,442,920
===============
Net Assets Consist of
Class A Shares of Capital Stock, $.10 par value, 40,000,000 shares
authorized $ 313,125
Class B Shares of Capital Stock, $.10 par value, 40,000,000 shares
authorized 881,723
Class C Shares of Capital Stock, $.10 par value, 40,000,000 shares
authorized 525,032
Class I Shares of Capital Stock, $.10 par value, 20,000,000 shares
authorized 460,303
Class R Shares of Capital Stock, $.10 par value, 40,000,000 shares
authorized 43
Paid-in capital in excess of par 334,576,760
Accumulated investment loss--net $ (1,204,691)
Accumulated realized capital losses on investments and foreign
currency transactions--net (36,394,625)
Unrealized appreciation on investments--net 21,285,250
---------------
Total accumulated losses--net (16,314,066)
---------------
Net assets $ 320,442,920
===============
Net Asset Value
Class A--Based on net assets of $47,024,179 and 3,131,248 shares
outstanding $ 15.02
===============
Class B--Based on net assets of $127,765,021 and 8,817,232 shares
outstanding $ 14.49
===============
Class C--Based on net assets of $75,925,550 and 5,250,324 shares
outstanding $ 14.46
===============
Class I--Based on net assets of $69,721,890 and 4,603,032 shares
outstanding $ 15.15
===============
Class R--Based on net assets of $6,280.31 and 430.44 shares outstanding $ 14.59
===============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Statement of Operations
For the Six Months Ended July 31, 2003
Investment Income
Dividends (net of $3,152 foreign withholding tax) $ 1,343,815
Interest 122,046
Securities lending--net 19,538
---------------
Total income 1,485,399
---------------
Expenses
Investment advisory fees $ 931,177
Account maintenance and distribution fees--Class B 585,029
Account maintenance and distribution fees--Class C 346,213
Transfer agent fees--Class B 232,674
Transfer agent fees--Class C 142,915
Transfer agent fees--Class I 106,344
Accounting services 75,079
Transfer agent fees--Class A 64,912
Account maintenance fees--Class A 47,778
Printing and shareholder reports 40,953
Registration fees 40,844
Custodian fees 25,898
Professional fees 18,676
Directors' fees and expenses 9,726
Pricing fees 417
Other 21,455
---------------
Total expenses 2,690,090
---------------
Investment loss--net (1,204,691)
---------------
Realized & Unrealized Gain (Loss) on Investments--Net
Realized loss on investments--net (16,768,934)
Change in unrealized appreciation/depreciation on investments--net 75,680,753
---------------
Total realized and unrealized gain on investments--net 58,911,819
---------------
Net Increase in Net Assets Resulting from Operations $ 57,707,128
===============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
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 $ (1,204,691) $ (2,493,996)
Realized loss on investments and foreign currency transactions--net (16,768,934) (14,560,767)
Change in unrealized appreciation/depreciation on investments--net 75,680,753 (91,293,370)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 57,707,128 (108,348,133)
--------------- ---------------
Distributions to Shareholders
Realized gain on investments--net:
Class A -- (832,980)
Class B -- (3,274,325)
Class C -- (1,874,541)
Class I -- (1,392,154)
--------------- ---------------
Net decrease in net assets resulting from distributions to shareholders -- (7,374,000)
--------------- ---------------
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share
transactions (10,874,666) 37,995,068
--------------- ---------------
Net Assets
Total increase (decrease) in net assets 46,832,462 (77,727,065)
Beginning of period 273,610,458 351,337,523
--------------- ---------------
End of period* $ 320,442,920 $ 273,610,458
=============== ===============
*Accumulated investment loss--net $ (1,204,691) --
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Financial Highlights
Class A+++++
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of period $ 12.29 $ 17.04 $ 16.14 $ 14.05 $ 14.13
--------- --------- --------- --------- ---------
Investment income (loss)--net++ (.02) (.04) --++++ --++++++ .11
Realized and unrealized gain (loss)
on investments andforeign currency
transactions--net 2.75 (4.40) 1.60 4.27 .22
--------- --------- --------- --------- ---------
Total from investment operations 2.73 (4.44) 1.60 4.27 .33
--------- --------- --------- --------- ---------
Less distributions from realized gain
on investments--net -- (.31) (.70) (2.18) (.41)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 15.02 $ 12.29 $ 17.04 $ 16.14 $ 14.05
========= ========= ========= ========= =========
Total Investment Return**
Based on net asset value per share 22.21%+++ (26.12%) 10.31% 33.66% 2.35%
========= ========= ========= ========= =========
Ratios to Average Net Assets
Expenses 1.40%* 1.37% 1.36% 1.78% 1.67%
========= ========= ========= ========= =========
Investment income (loss)--net (.36%)* (.26%) (.02%) .02% .73%
========= ========= ========= ========= =========
Supplemental Data
Net assets, end of period (in thousands) $ 47,024 $ 31,504 $ 36,225 $ 7,757 $ 5,913
========= ========= ========= ========= =========
Portfolio turnover 41.81% 73.90% 98.94% 153.48% 52.89%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Amount is less than $(.01) per share.
++++++Amount is less than $.01 per share.
+++Aggregate total investment return.
+++++Effective April 14, 2003, Class D Shares were redesignated
Class A Shares.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Financial Highlights (continued)
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of period $ 11.90 $ 16.64 $ 15.86 $ 13.72 $ 13.92
--------- --------- --------- --------- ---------
Investment loss--net++ (.07) (.15) (.12) (.11) (.02)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 2.66 (4.29) 1.56 4.17 .22
--------- --------- --------- --------- ---------
Total from investment operations 2.59 (4.44) 1.44 4.06 .20
--------- --------- --------- --------- ---------
Less distributions from realized gain
on investments--net -- (.30) (.66) (1.92) (.40)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 14.49 $ 11.90 $ 16.64 $ 15.86 $ 13.72
========= ========= ========= ========= =========
Total Investment Return**
Based on net asset value per share 21.76%+++ (26.75%) 9.45% 32.50% 1.45%
========= ========= ========= ========= =========
Ratios to Average Net Assets
Expenses 2.21%* 2.17% 2.17% 2.62% 2.51%
========= ========= ========= ========= =========
Investment loss--net (1.18%)* (1.05%) (.78%) (.80%) (.11%)
========= ========= ========= ========= =========
Supplemental Data
Net assets, end of period (in thousands) $ 127,765 $ 115,748 $ 162,316 $ 67,062 $ 59,736
========= ========= ========= ========= =========
Portfolio turnover 41.81% 73.90% 98.94% 153.48% 52.89%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Financial Highlights (continued)
Class C
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of period $ 11.88 $ 16.61 $ 15.84 $ 13.70 $ 13.91
--------- --------- --------- --------- ---------
Investment loss--net++ (.08) (.15) (.12) (.12) (.02)
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 2.66 (4.27) 1.55 4.18 .21
--------- --------- --------- --------- ---------
Total from investment operations 2.58 (4.42) 1.43 4.06 .19
--------- --------- --------- --------- ---------
Less distributions from realized gain
on investments--net -- (.31) (.66) (1.92) (.40)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 14.46 $ 11.88 $ 16.61 $ 15.84 $ 13.70
========= ========= ========= ========= =========
Total Investment Return**
Based on net asset value per share 21.72%+++ (26.73%) 9.38% 32.55% 1.38%
========= ========= ========= ========= =========
Ratios to Average Net Assets
Expenses 2.23%* 2.19% 2.19% 2.65% 2.55%
========= ========= ========= ========= =========
Investment loss--net (1.19%)* (1.07%) (.79%) (.84%) (.15%)
========= ========= ========= ========= =========
Supplemental Data
Net assets, end of period (in thousands) $ 75,926 $ 67,233 $ 80,227 $ 37,475 $ 32,543
========= ========= ========= ========= =========
Portfolio turnover 41.81% 73.90% 98.94% 153.48% 52.89%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Financial Highlights (continued)
Class I+++++
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
July 31, For the Year Ended January 31,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001 2000
Per Share Operating Performance
Net asset value, beginning of period $ 12.38 $ 17.12 $ 16.20 $ 14.13 $ 14.18
--------- --------- --------- --------- ---------
Investment income (loss)--net++ (.01) --++++ .03 --++++ .15
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 2.78 (4.42) 1.62 4.33 .22
--------- --------- --------- --------- ---------
Total from investment operations 2.77 (4.42) 1.65 4.33 .37
--------- --------- --------- --------- ---------
Less distributions from realized gain
on investments--net -- (.32) (.73) (2.26) (.42)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 15.15 $ 12.38 $ 17.12 $ 16.20 $ 14.13
========= ========= ========= ========= =========
Total Investment Return**
Based on net asset value per share 22.37%+++ (25.92%) 10.56% 34.01% 2.57%
========= ========= ========= ========= =========
Ratios to Average Net Assets
Expenses 1.16%* 1.12% 1.10% 1.47% 1.41%
========= ========= ========= ========= =========
Investment income (loss)--net (.12%)* (.01%) .19% (.01%) .98%
========= ========= ========= ========= =========
Supplemental Data
Net assets, end of period (in thousands) $ 69,722 $ 59,125 $ 72,570 $ 3,770 $ 369
========= ========= ========= ========= =========
Portfolio turnover 41.81% 73.90% 98.94% 153.48% 52.89%
========= ========= ========= ========= =========
*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.
+++++Effective April 14, 2003, Class A Shares were redesignated
Class I Shares.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Financial Highlights (concluded)
Class R
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Feb. 4, 2003++
to July 31,
Increase (Decrease) in Net Asset Value: 2003
Per Share Operating Performance
Net asset value, beginning of period $ 11.81
---------
Investment income--net++++ .02
Realized and unrealized gain on investments--net 2.76
---------
Total from investment operations 2.78
---------
Net asset value, end of period $ 14.59
=========
Total Investment Return**
Based on net asset value per share 23.54%+++
=========
Ratios to Average Net Assets
Expenses 1.65%*
=========
Investment loss--net (.61%)*
=========
Supplemental Data
Net assets, end of period (in thousands) $ 6
=========
Portfolio turnover 41.81%
=========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
++++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Mid Cap Value 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 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.
Effective April 14, 2003, Class A Shares were redesignated Class I
Shares and Class D Shares were redesignated Class A Shares. The
Fund's financial statements and financial highlights contained
within this report reflect the new share class redesignation. Shares
of Class A and Class I are sold with a front-end sales charge.
Shares of Class B and Class C may be subject to a contingent
deferred sales charge. Class R Shares are sold only to certain
retirement plans. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class A, Class B, Class C and Class R Shares
bear certain expenses related to the account maintenance of such
shares, and Class B, Class C and Class R 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. 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 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 value
quotations are not available are valued at their fair 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.
(b) Derivative financial instruments--The Fund may engage in various
portfolio 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.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Notes to Financial Statements (continued)
* 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 write and purchase 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 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.
* 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.
* 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.
(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 U.S. 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). 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 is recognized on the accrual basis.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Notes to Financial Statements (continued)
(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.
(h) 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.
(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) Custodian bank--The Fund recorded an amount payable to the
custodian bank which resulted from management estimates of available
cash.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM is Princeton Services, Inc. ("PSI"), an indirect,
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner. The Program 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.
MLIM 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 at the annual rate of .65% of
the average net assets of the Fund.
Pursuant to the Distribution Plans adopted by the Program 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
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Class R .25% .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 A, Class B, Class C and Class R
shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B, Class C and Class R shareholders.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Notes to Financial Statements (continued)
For the six months ended July 31, 2003, FAMD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class I Shares as follows:
FAMD MLPF&S
Class A $981 $15,340
Class I $ 10 $ 149
For the six months ended July 31, 2003, MLPF&S received contingent
deferred sales charges of $136,606 and $7,724 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 $13,603,999 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 MLIM, 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 MLIM or its
affiliates. For the six months ended July 31, 2003, MLIM, LLC
received $8,915 in securities lending agent fees.
In addition, MLPF&S received $90,602 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended July 31, 2003.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Program's transfer agent.
For the six months ended July 31, 2003, the Fund reimbursed MLIM
$3,364 for certain accounting services.
Certain officers and/or directors of the Program are officers and/or
directors of MLIM, FDS, PSI, 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 $113,368,281 and
$131,546,110, 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 $ (16,768,934) $ 21,285,250
--------------- ---------------
Total $ (16,768,934) $ 21,285,250
=============== ===============
As of July 31, 2003, net unrealized appreciation for Federal income
tax purposes aggregated $13,408,286, of which $39,723,968 related to
appreciated securities and $26,315,682 related to depreciated
securities. At July 31, 2003, the aggregate cost of investments for
Federal income tax purposes was $388,560,169.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $(10,874,666) and $37,995,068 for the six months
ended July 31, 2003 and the year ended January 31, 2003,
respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
July 31, 2003++ Shares Amount
Shares sold 570,614 $ 7,472,028
Automatic conversion of shares 389,186 5,162,261
------------- --------------
Total issued 959,800 12,634,289
Shares redeemed (392,493) (5,225,375)
------------- --------------
Net increase 567,307 $ 7,408,914
============= ==============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Notes to Financial Statements (continued)
Class A Shares for the Year Dollar
Ended January 31, 2003++ Shares Amount
Shares sold 1,144,133 $ 17,493,339
Automatic conversion of shares 339,530 5,078,735
Shares issued to shareholders
in reinvestment of distributions 60,450 779,799
------------- --------------
Total issued 1,544,113 23,351,873
Shares redeemed (1,106,276) (15,472,902)
------------- --------------
Net increase 437,837 $ 7,878,971
============= ==============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
Class B Shares for the
Six Months Ended Dollar
July 31, 2003 Shares Amount
Shares sold 553,156 $ 7,302,047
Automatic conversion of shares (402,605) (5,162,261)
Shares redeemed (1,056,796) (13,264,629)
------------- --------------
Net decrease (906,245) $ (11,124,843)
============= ==============
Class B Shares for the Year Dollar
Ended January 31, 2003 Shares Amount
Shares sold 3,462,321 $ 52,641,677
Shares issued to shareholders
in reinvestment of distributions 233,947 2,936,025
------------- --------------
Total issued 3,696,268 55,577,702
Automatic conversion of shares (348,833) (5,078,735)
Shares redeemed (3,379,906) (45,358,371)
------------- --------------
Net increase (decrease) (32,471) $ 5,140,596
============= ==============
Class C Shares for the
Six Months Ended Dollar
July 31, 2003 Shares Amount
Shares sold 272,064 $ 3,594,190
Shares redeemed (680,741) (8,657,378)
------------- --------------
Net decrease (408,677) $ (5,063,188)
============= ==============
Class C Shares for the Year Dollar
Ended January 31, 2003 Shares Amount
Shares sold 2,555,721 $ 39,217,666
Shares issued to shareholders
in reinvestment of distributions 133,726 1,675,585
------------- --------------
Total issued 2,689,447 40,893,251
Shares redeemed (1,860,313) (24,805,121)
------------- --------------
Net increase 829,134 $ 16,088,130
============= ==============
Class I Shares for the
Six Months Ended Dollar
July 31, 2003++ Shares Amount
Shares sold 570,061 $ 7,805,790
Shares redeemed (743,445) (9,907,563)
------------- --------------
Net decrease (173,384) $ (2,101,773)
============= ==============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
Class I Shares for the Year Dollar
Ended January 31, 2003++ Shares Amount
Shares sold 4,805,105 $ 72,268,015
Shares issued to shareholders
in reinvestment of distributions 103,179 1,339,256
------------- --------------
Total issued 4,908,284 73,607,271
Shares redeemed (4,370,384) (64,719,900)
------------- --------------
Net increase 537,900 $ 8,887,371
============= ==============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
Class R Shares for the
Period February 4, 2003++ to Dollar
July 31, 2003 Shares Amount
Shares sold 431 $ 6,235
Shares redeemed (1) (11)
------------- --------------
Net increase 430 $ 6,224
============= ==============
++Commencement of operations.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Notes to Financial Statements (concluded)
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM 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
$3,136,600, all of which expires in 2011. This amount will be
available to offset like amounts of any future taxable gains.
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
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
R. Elise Baum, 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
800-637-3863
MERRILL LYNCH MID CAP VALUE FUND, JULY 31, 2003
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (annual requirement
only)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. - N/A (annual requirement only)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-
3 under the Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees. N/A
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A
Item 8--Reserved
Item 9(a) - The registrant's certifying officers have reasonably
designed such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Merrill Lynch Mid Cap Value Fund
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch Mid Cap Value Fund
Date: September 23, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
Merrill Lynch Mid Cap Value Fund
Date: September 23, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Mid Cap Value Fund
Date: September 23, 2003
Attached hereto as a furnished exhibit are the certifications
pursuant to Section 906 of the Sarbanes-Oxley Act.