UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-7177
Name of Fund: Merrill Lynch Mid Cap Value Opportunities 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 Opportunities Fund of The Asset
Program, Inc., 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: 02/01/04 - 07/31/04
Item 1 - Report to Stockholders
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
Mid Cap Value
Opportunities Fund
Semi-Annual Report
July 31, 2004
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) at www.mutualfunds.ml.com;
and (3) on the Securities and Exchange Commission's Web site at
http://www.sec.gov. Information about how the Fund voted proxies
relating to securities held in the Fund's portfolio during the
most recent 12-month period ended June 30 is available (1) at
www.mutualfunds.ml.com; and (2) on the Securities and Exchange
Commission's Web site at http://www.sec.gov.
Merrill Lynch Mid Cap Value Opportunities Fund
Box 9011
Princeton, NJ
08543-9011
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Merrill Lynch Mid Cap Value Opportunities Fund
Portfolio Information as of July 31, 2004
Percent of
Ten Largest Equity Holdings Net Assets
Parametric Technology Corporation 2.4%
Raytheon Company 2.4
Noble Energy, Inc. 2.2
CommScope, Inc. 2.2
WebMD Corporation 2.1
Tellabs, Inc. 2.1
Conseco, Inc. 2.0
Valassis Communications, Inc. 2.0
Convergys Corporation 1.9
Banknorth Group, Inc. 1.8
Sector Representation Percent of
of Equity Holdings++ Net Assets
Information Technology 20.1%
Financials 18.4
Industrials 16.9
Consumer Discretionary 10.1
Health Care 9.9
Energy 8.9
Materials 4.9
Consumer Staples 3.8
Utilities 1.0
++Total may not equal 100%.
Percent of
Five Largest Industries* Net Assets
Electronic Equipment & Instruments 5.6%
Diversified Financial Services 5.4
Media 5.3
Commercial Banks 5.0
IT Services 4.9
*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.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
A Letter From the President
Dear Shareholder
The year is more than half behind us, and it seems appropriate to
take a step back and put 2004 into context. In recent months, the
Federal Reserve Board (the Fed) has taken center stage as it shifts
away from its long-accommodative monetary stance. In a much-
anticipated move, the Fed raised the Federal Funds rate 25 basis
points (.25%) on June 30, representing the first interest rate
increase in four years. Shortly after period-end, the Fed announced
an additional 25 basis point interest rate hike, bringing the target
short-term interest rate to 1.50% - still low by historical
standards. The Fed has been very deliberate in telegraphing its
intention to take a "measured" approach to interest rate increases
in order to avoid upsetting the economy or the financial markets.
Still, the Fed has stated that it may move more aggressively if
inflation and economic growth accelerate more than anticipated.
While inflation has moved up on a cyclical basis, this is an
indication that the Fed has been successful in avoiding deflation -
just as it set out to do a year ago. The challenge now is to
normalize interest rates in order to keep inflation within
acceptable limits. The futures curve currently projects further
increases in short-term interest rates before year-end.
In addition to the Fed policy change, the financial markets recently
have had to grapple with a tense geopolitical environment, higher
oil prices and the worry and anticipation that accompanies a
presidential election. Notwithstanding these concerns, equities were
due for a pause given that the Standard & Poor's 500 (S&P 500) Index
rose nearly 50% between its March 2003 low and the highs of early
2004. Under the circumstances, the market decline in recent months
has been minor. For the six-month and 12-month periods ended July
31, 2004, the Standard & Poor's 500 Index returned -1.78% and
+13.17%, respectively. Supporting the stock market, despite the
aforementioned uncertainties, was continued strong corporate
earnings growth. Company reports have continued to surprise
investors, in many cases still exceeding consensus earnings
forecasts.
As always, our investment professionals are closely monitoring the
markets, the economy and the overall environment in an effort to
make well-informed decisions for the portfolios they manage. Our
goal is to provide shareholders with competitive returns, while
always keeping one eye on managing the unavoidable risk inherent in
investing.
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 OPPORTUNITIES FUND, JULY 31, 2004
A Discussion With Your Fund's Portfolio Manager
Merrill Lynch Mid Cap Value Opportunities Fund delivered strong
relative performance for the period, benefiting from favorable stock
selection across various industry sectors.
How did the Fund perform during the period in light of the existing
market conditions?
For the six-month period ended July 31, 2004, Merrill Lynch Mid Cap
Value Opportunities Fund's Class A, Class B, Class C, Class I and
Class R Shares had total returns of +1.27%, +.84%, +.84%, +1.42% and
+1.13%, respectively. (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 and 7 of this report
to shareholders.) The Fund significantly outperformed the -1.01%
total return of the benchmark Standard & Poor's (S&P) MidCap 400
Index and the +.63% average return of the Lipper Mid Cap Value Funds
category. (Funds in this Lipper category invest primarily in stocks
of mid-capitalization companies that are considered to be
undervalued relative to a major unmanaged stock index.)
The six-month period may be best understood as two separate
environments. The first two months were characterized by equity
market strength, with small cap stocks extending their lead over
large cap stocks. The next four months were characterized by sharply
declining equity markets pressured by interest rate concerns, weak
employment data, and higher energy prices. The second environment
favored defensive issues and more-established companies. We have
gradually repositioned the Fund to benefit from such a "quality
trade," or rotation toward higher-quality companies with modest
price-to-earnings ratios.
Leading contributors to the Fund's strong relative performance
included CNF Inc., a provider of transportation and logistics
services. CNF shares rallied on strong operating results at the
company's trucking division. Corrections Corporation of America, a
provider of correctional facilities, also contributed favorably to
results as the company absorbed excess capacity, and announced new
contract wins. Shares of Noble Energy, Inc., an exploration and
production company, further benefited Fund results on production
gains and higher energy prices.
In terms of sector positioning, exposure to technology stocks had a
negative effect on Fund results during the period. However, our
specific technology holdings performed much better than technology
stocks in the S&P 400 Index. The favorable stock selection offset
much of the negative impact associated with the overweighting in an
underperforming sector. Good stock picking in the industrials and
healthcare sectors also contributed to the positive performance
relative to the benchmark index and competitor funds.
What changes were made to the portfolio during the period?
Most importantly, we trimmed exposure to the consumer discretionary
sector. We believe that rapid growth in consumer spending has
largely run its course and is likely to moderate with the slowdown
in mortgage-refinancing activity and higher energy prices. We
eliminated several retail stocks, including American Eagle
Outfitters, Inc., Abercrombie & Fitch Co., Toys 'R' Us, Inc. and
J.C. Penney Company, Inc. We also reduced exposure to restaurant
stocks with the sale of Outback Steakhouse, Inc. and Darden
Restaurants, Inc. In addition, we trimmed exposure to gaming stocks
by eliminating our positions in MGM Mirage Inc. and Mandalay Resort
Group.
In the healthcare sector, we have been active buyers of specialty
pharmaceutical stocks. Market concern about generic competition in
the years ahead has pressured current valuations. We think the
competitive concerns are valid but, in certain circumstances,
underestimate the ability of specialty pharmaceutical companies to
respond with licensing agreements and market consolidation. There
are specific steps that specialty pharmaceutical companies can take
to strengthen their competitive position. Recently, we have seen
some merger-and-acquisition activity, as in the case of King
Pharmaceuticals, Inc., a significant Fund investment. Mylan
Laboratories, a generic company, offered to acquire King, creating a
generic ownership of a branded products company.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Other healthcare stocks added to the portfolio in the past six
months include Shire Pharmaceuticals Group, a specialty
pharmaceuticals company; AmerisourceBergen Corporation, a drug
distributor; and Cephalon Inc., a biopharmaceutical company.
Offsetting these purchases, we trimmed some of our best-performing
healthcare stocks, including Beckton Dickinson and Company and C.R.
Bard, Inc. We selectively added financial services stocks to the
portfolio, including Conseco Inc., a provider of life and long-term
care insurance; Colonial BancGroup Inc., a regional bank holding
company; and E*TRADE Financial Corp., a retail brokerage and banking
institution. Overall, we remain underweighted in the financial
services sector.
Recently, we rebuilt exposure to information technology stocks given
extreme share price weakness and, in our view, compelling low
valuation levels. We anticipate a shift away from consumer spending
toward an environment where business spending leads the economy.
Corporate balance sheets are strong and cash generation is high by
historical standards. We believe businesses will emphasize spending
on information technology, particularly with tax incentives that
permit accelerated depreciation on investments this year. One recent
addition to the portfolio is shares of CommScope, Inc., a
manufacturer of coaxial, fiber-optic and other high-performance
cable products for data, voice and video transmission.
How was the Fund positioned at the close of the period?
As of July 31, 2004, the Fund was underweight in the financial
services, consumer discretionary and utilities sectors. The Fund was
overweight in the information technology and industrials sectors.
Given our expectation for a slowdown in consumer spending and an
increase in business spending, the portfolio is positioned to
benefit from what we consider business-centric rather than consumer-
centric investments.
We maintain a positive outlook for mid-cap stocks. While small,
speculative stocks performed well in 2003, we anticipate that larger
companies with more predictable earnings prospects will perform best
in the months ahead. In our opinion, mid-cap valuation levels
currently are more attractive than valuations on small- and micro-
cap issues. Thus, the Fund is positioned to benefit from the
"quality trade" discussed earlier. We have positioned Merrill Lynch
Mid Cap Value Opportunities Fund higher up the capitalization scale
to target companies in the $2.5 billion - $5 billion market cap
range.
R. Elise Baum
Vice President and Portfolio Manager
August 12, 2004
Effective July 26, 2004, Merrill Lynch Mid Cap Value Fund, a series
of The Asset Program, Inc., changed its name to Merrill Lynch Mid
Cap Value Opportunities Fund. This change does not affect your
holding in the Fund, the management team or the Fund's investment
objective. The Fund continues to seek capital appreciation and,
secondarily, income, by investing in securities, primarily equities,
that Fund management believes are undervalued and, therefore,
represent investment value.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Performance Data
About Fund Performance
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).
* 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. Current performance may be lower or higher
than the performance data quoted. Refer to www.mlim.ml.com to obtain
more current performance information. 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 gain distributions, if any, 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.
Recent Performance Results
6-Month 12-Month Since Inception
As of July 31, 2004 Total Return Total Return Total Return
ML Mid Cap Value Opportunities Fund--Class A Shares* +1.27% +17.24% +197.51%
ML Mid Cap Value Opportunities Fund--Class B Shares* +0.84 +16.36 +175.01
ML Mid Cap Value Opportunities Fund--Class C Shares* +0.84 +16.32 +174.54
ML Mid Cap Value Opportunities Fund--Class I Shares* +1.42 +17.56 +204.53
ML Mid Cap Value Opportunities Fund--Class R Shares* +1.13 +16.93 + 44.45
S&P MidCap 400 Index** -1.01 +17.83 +280.70/+42.68
*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 unmanaged Index is a market value-weighted index that
consists of 400 domestic stocks and 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.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Performance Data (concluded)
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 7/31/04 +17.24% +11.09%
Five Years Ended 7/31/04 + 7.65 + 6.50
Inception (2/01/95) through
7/31/04 +12.17 +11.53
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 7/31/04 +16.36% +12.36%
Five Years Ended 7/31/04 + 6.78 + 6.47
Inception (2/01/95) through
7/31/04 +11.25 +11.25
*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 7/31/04 +16.32% +15.32%
Five Years Ended 7/31/04 + 6.75 + 6.75
Inception (2/01/95) through
7/31/04 +11.22 +11.22
*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 7/31/04 +17.56% +11.39%
Five Years Ended 7/31/04 + 7.93 + 6.77
Inception (2/01/95) through
7/31/04 +12.45 +11.81
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Class R Shares Return
One Year Ended 7/31/04 +16.93%
Inception (2/04/03) through 7/31/04 +28.11
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Disclosure of Expenses
Shareholders of this Fund may incur the following charges:
(a) expenses related to transactions, including sales charges,
redemption fees, and exchange fees; and (b) operating expenses
including advisory fees, distribution fees including 12(b)-1 fees,
and other Fund expenses. The following example (which is based on a
hypothetical investment of $1,000 invested on February 1, 2004 and
held through July 31, 2004) is intended to assist shareholders both
in calculating expenses based on an investment in the Fund and in
comparing these expenses with similar costs of investing in other
mutual funds.
The first table below provides information about actual account
values and actual expenses. In order to estimate the expenses a
shareholder paid during the period covered by this report,
shareholders can divide their account value by $1,000 and then
multiply the result by the number in the first line under the
heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed rate of return of 5% per year before
expenses. In order to assist shareholders in comparing the ongoing
expenses of investing in this Fund and other funds, compare the 5%
hypothetical example with the 5% hypothetical examples that appear
in other funds' shareholder reports.
The expenses shown in the table are intended to highlight
shareholders ongoing costs only and do not reflect any transactional
expenses, such as sales charges, redemption fees, or exchange fees.
Therefore, the second table is useful in comparing ongoing expenses
only, and will not help shareholders determine the relative total
expenses of owning different funds. If these transactional expenses
were included, shareholder expenses would have been higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value February 1, 2004
February 1, 2004 July 31, 2004 to July 31, 2004
Actual
Class A $1,000 $1,012.70 $ 6.36
Class B $1,000 $1,008.40 $10.24
Class C $1,000 $1,008.40 $10.29
Class I $1,000 $1,014.20 $ 5.11
Class R $1,000 $1,011.30 $ 7.55
Hypothetical (5% annual return before expenses)**
Class A $1,000 $1,018.55 $ 6.37
Class B $1,000 $1,014.67 $10.27
Class C $1,000 $1,014.62 $10.32
Class I $1,000 $1,019.79 $ 5.12
Class R $1,000 $1,017.35 $ 7.57
*For each class of the Fund, expenses are equal to the annualized
expense ratio for the class (1.27% for Class A, 2.05% for Class B,
2.06% for Class C, 1.02% for Class I and 1.51% for Class R),
multiplied by the average account value over the period, multiplied
by 182/366 (to reflect the one-half year period shown).
**Hypothetical 5% annual return before expenses is calculated by
multiplying the number of days in the most recent fiscal half year
divided by 366.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Schedule of Investments
North Value
America Industry* Shares Held Common Stocks (in U.S. dollars)
United States-- Aerospace & 124,700 Northrop Grumman Corporation (j) $ 6,559,220
91.9% Defense--4.1% 278,600 Raytheon Company 9,347,030
--------------
15,906,250
Air Freight & 115,400 CNF Transportation Inc. 4,761,404
Logistics--1.2%
Auto Components-- 125,500 American Axle & Manufacturing Holdings, Inc. 4,310,925
1.1%
Beverages--0.8% 87,200 ++Constellation Brands, Inc. (Class A) 3,303,136
Biotechnology-- 33,700 ++Cephalon, Inc. 1,702,524
2.0% 206,400 ++Human Genome Sciences, Inc. 2,069,160
195,700 ++Maxygen Inc. 1,939,387
100,300 ++MedImmune, Inc. (j) 2,310,912
--------------
8,021,983
Building Products-- 95,500 Masco Corporation 2,887,920
0.7%
Capital Markets-- 159,400 ++E*TRADE Financial Corp. 1,764,558
2.0% 373,100 Janus Capital Group Inc. (j) 4,947,306
141,500 ++Knight Trading Group, Inc. (Class A) 1,204,165
--------------
7,916,029
Commercial Banks-- 229,200 Banknorth Group, Inc. 7,313,772
5.0% 71,500 The Colonial BancGroup, Inc. 1,379,235
109,300 Compass Bancshares, Inc. 4,819,037
184,375 First Midwest Bancorp, Inc. 6,226,344
--------------
19,738,388
Commercial 598,300 ++Allied Waste Industries, Inc. 5,528,292
Services & 55,400 Avery Dennison Corporation 3,355,578
Supplies--5.2% 231,500 Cendant Corporation 5,296,720
169,500 ++Corrections Corporation of America 6,390,150
--------------
20,570,740
Communications 416,800 ++CommScope, Inc. 8,586,080
Equipment--4.3% 923,800 ++Tellabs, Inc. (j) 8,231,058
--------------
16,817,138
Construction & 58,100 Fluor Corporation 2,646,455
Engineering--0.7%
Construction 71,400 Martin Marietta Materials, Inc. 3,123,750
Materials--0.8%
Containers & 441,000 ++Crown Holdings, Inc. 4,471,740
Packaging--2.3% 237,000 ++Smurfit-Stone Container Corporation (j) 4,410,570
--------------
8,882,310
Diversified 43,700 Financial Select Sector SPDR Fund (f)(j) 1,222,289
Financial 44,700 iShares Russell 2000 Index Fund (j)(k) 4,917,000
Services--5.4% 36,200 iShares S&P SmallCap 600 Index Fund (d)(j) 5,035,058
28,500 S&P 500 Depositary Receipts (e)(j) 3,158,370
66,500 S&P Mid-Cap 400 Depositary Receipts (b)(j) 7,049,000
--------------
21,381,717
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Schedule of Investments (continued)
North America Value
(continued) Industry* Shares Held Common Stocks (in U.S. dollars)
United States Electric 102,900 Cinergy Corp. $ 3,935,925
(continued) Utilities--1.0%
Electronic 180,300 Anixter International Inc. 6,036,444
Equipment & 331,000 ++Ingram Micro Inc. (Class A) 4,716,750
Instruments--5.6% 422,200 Symbol Technologies, Inc. 5,526,598
154,300 ++Tech Data Corporation 5,780,078
--------------
22,059,870
Energy Equipment & 109,900 BJ Services Company (j) 5,457,634
Service--4.6% 264,900 Diamond Offshore Drilling, Inc. 6,474,156
91,600 Energy Select Sector SPDR Fund (g)(j) 2,972,420
45,100 Oil Service HOLDRs Trust (c)(j) 3,372,578
--------------
18,276,788
Food Products-- 161,795 Archer-Daniels-Midland Company 2,496,497
2.9% 130,100 ConAgra Foods, Inc. 3,382,600
546,100 ++Del Monte Foods Company 5,755,894
--------------
11,634,991
Health Care 71,900 C.R. Bard, Inc. 3,968,880
Equipment & 15,100 ++Cutera, Inc. 211,400
Supplies--1.1% --------------
4,180,280
Health Care 37,200 AmerisourceBergen Corporation 2,011,032
Providers & 1,025,100 ++WebMD Corporation (j) 8,344,314
Services--2.6% --------------
10,355,346
IT Services--4.9% 580,100 ++Convergys Corporation 7,680,524
251,700 Sabre Holdings Corporation (Class A) 6,425,901
225,900 ++Sungard Data Systems Inc. 5,265,729
--------------
19,372,154
Insurance--4.3% 87,500 ACE Limited 3,551,625
439,100 ++Conseco, Inc. 7,895,018
156,700 Protective Life Corporation 5,680,375
--------------
17,127,018
Internet 2,597,000 ++Vignette Corporation 3,713,710
Software &
Services--0.9%
Machinery--2.3% 81,200 Eaton Corporation 5,248,768
47,300 ITT Industries, Inc. 3,781,635
--------------
9,030,403
Media--5.3% 119,400 Harte-Hanks, Inc. 2,884,704
55,500 Knight Ridder, Inc. (j) 3,651,345
597,200 ++Paxson Communications Corporation 1,815,488
330,500 The Reader's Digest Association, Inc. (Class A) 4,719,540
267,500 ++Valassis Communications, Inc. 7,821,700
--------------
20,892,777
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Schedule of Investments (continued)
North America Value
(concluded) Industry* Shares Held Common Stocks (in U.S. dollars)
United States Metals & 332,400 ++GrafTech International Ltd. $ 3,666,372
(concluded) Mining--1.8% 108,300 Steel Dynamics, Inc. (j) 3,546,825
--------------
7,213,197
Oil & Gas--4.3% 160,300 Noble Energy, Inc. 8,866,193
47,400 Sunoco, Inc. 3,231,258
125,200 Unocal Corporation 4,852,752
--------------
16,950,203
Pharmaceuticals-- 436,600 ++King Pharmaceuticals, Inc. 4,929,214
2.1% 51,200 Medicis Pharmaceutical (Class A) 1,831,424
106,400 Mylan Laboratories, Inc. 1,576,848
--------------
8,337,486
Real Estate--0.4% 59,800 Equity Office Properties Trust 1,551,810
Road & Rail--1.8% 231,200 CSX Corporation 7,236,560
Semiconductors & 578,600 ++Applied Micro Circuits Corporation 2,082,960
Semiconductor 80,200 ++DSP Group, Inc. 1,580,742
Equipment--0.9% --------------
3,663,702
Software--3.5% 305,000 ++BEA Systems, Inc. (j) 1,979,450
119,200 ++McAfee Inc. 2,143,216
2,129,200 ++Parametric Technology Corporation 9,666,568
--------------
13,789,234
Specialty Retail-- 219,900 Foot Locker, Inc. 4,947,750
3.7% 275,180 Limited Brands, Inc. 5,624,679
68,100 ++Linens 'n Things, Inc. 1,812,822
74,600 The Talbots, Inc. 2,297,680
--------------
14,682,931
Thrifts & Mortgage 253,600 Sovereign Bancorp, Inc. (j) 5,520,872
Finance--1.4%
Trading 70,500 W. W. Grainger, Inc. 3,732,975
Companies &
Distributors--0.9%
Total Common Stocks in North America--91.9% 363,526,377
Western Europe
Switzerland-- Biotechnology-- 159,900 Serono SA (ADR) (a) 2,448,069
0.6% 0.6%
Total Common Stocks in Switzerland 2,448,069
United Pharmaceuticals-- 221,400 Shire Pharmaceuticals Group PLC (ADR) (a) 5,884,812
Kingdom--1.5% 1.5%
Total Common Stocks in the United Kingdom 5,884,812
Total Common Stocks in Western Europe--2.1% 8,332,881
Total Common Stocks (Cost--$338,969,102)--94.0% 371,859,258
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Schedule of Investments (concluded)
Value
Beneficial Interest Short-Term Securities (in U.S. dollars)
$17,574,552 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (h) $ 17,574,552
65,585,100 Merrill Lynch Liquidity Series, LLC Money Market
Series (h)(i) 65,585,100
Total Short-Term Securities
(Cost--$83,159,652)--21.0% 83,159,652
Total Investments (Cost--$422,128,754**)--115.0% 455,018,910
Liabilities in Excess of Other Assets--(15.0%) (59,197,307)
--------------
Net Assets--100.0% $ 395,821,603
==============
++ 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.
** The cost and unrealized appreciation/depreciation of investments
as of July 31, 2004, as computed for federal income tax purposes
were as follows:
Aggregate cost $ 425,634,435
=============
Gross unrealized appreciation 54,137,490
Gross unrealized depreciation (24,753,015)
-------------
Net unrealized appreciation $ 29,384,475
=============
(a) American Depositary Receipts (ADR).
(b) Represents ownership in S&P Mid Cap 400 SPDR Trust, a registered
unit investment trust. The investment objective of the S&P Mid Cap
400 SPDR Trust 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) iShares S&P SmallCap 600 Index Fund is an exchange traded Fund.
The Fund seeks investment results that correspond to the performance
of the S&P SmallCap 600 Index.
(e) Represents ownership in S&P 500 SPDR Trust, a registered unit
investment trust. The investment objective of the S&P 500 SPDR Trust
is to provide investment results that generally correspond to the
price and yield performance of the component stocks of the S&P 500
Index.
(f) 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.
(g) Represents ownership in Energy Select Sector SPDR Fund,
registered in the United States. The investment objective of the
Energy Select Sector SPDR Fund is to provide investment results that
before expenses corresponds to the performance of The Energy Select
Sector Index.
(h) 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) were as
follows:
Interest/
Net Dividend
Affiliate Activity Income
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ 11,368,066 $102,497
Merrill Lynch Liquidity Series,
LLC Money Market Series $ 17,401,950 $ 25,742
Merrill Lynch Premier
Institutional Fund (16,061,050) $ 5,414
(i) Security was purchased with the cash proceeds from securities
loans.
(j) Security, or a portion of security, is on loan.
(k) iShares Russell 2000 Index Fund is an exchange-traded Fund. The
Fund seeks investment results that correspond to the performance of
Russell 2000 Index.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Statement of Assets and Liabilities
As of July 31, 2004
Assets
Investments, in unaffiliated securities, at value (including securities
loaned of $63,405,410) (identified cost--$338,969,102) $ 371,859,258
Investments, in affiliated securities, at value (identified cost--$83,159,652) 83,159,652
Receivables:
Securities sold $ 8,197,674
Capital shares sold 954,012
Dividends 252,861
Interest from affiliates 17,697
Securities lending--net 4,502 9,426,746
---------------
Prepaid expenses 28,817
---------------
Total assets 464,474,473
---------------
Liabilities
Collateral on securities loaned, at value 65,585,100
Payables:
Securities purchased 1,891,114
Capital shares redeemed 441,607
Investment adviser 249,291
Distributor 193,949
Other affiliates 181,530
Custodian bank 69,595 3,027,086
---------------
Accrued expenses and other liabilities 40,684
---------------
Total liabilities 68,652,870
---------------
Net Assets
Net assets $ 395,821,603
===============
Net Assets Consist of
Class A Shares of Capital Stock, $.10 par value, 40,000,000 shares authorized $ 392,574
Class B Shares of Capital Stock, $.10 par value, 40,000,000 shares authorized 766,983
Class C Shares of Capital Stock, $.10 par value, 40,000,000 shares authorized 508,572
Class I Shares of Capital Stock, $.10 par value, 20,000,000 shares authorized 610,356
Class R Shares of Capital Stock, $.10 par value, 40,000,000 shares authorized 18,383
Paid-in capital in excess of par 352,906,386
Accumulated investment loss--net $ (1,209,203)
Undistributed realized capital gains on investments--net 8,937,396
Unrealized appreciation on investments--net 32,890,156
---------------
Total accumulated earnings--net 40,618,349
---------------
Net Assets $ 395,821,603
===============
Net Asset Value
Class A--Based on net assets of $69,136,509 and 3,925,744 shares outstanding $ 17.61
===============
Class B--Based on net assets of $129,306,572 and 7,669,832 shares outstanding $ 16.86
===============
Class C--Based on net assets of $85,557,457 and 5,085,723 shares outstanding $ 16.82
===============
Class I--Based on net assets of $108,684,219 and 6,103,563 shares outstanding $ 17.81
===============
Class R--Based on net assets of $3,136,846 and 183,827 shares outstanding $ 17.06
===============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Statement of Operations
For the Six Months Ended July 31, 2004
Investment Income
Dividends (net of $3,785 foreign withholding tax) $ 1,927,464
Interest from affiliates 102,497
Securities lending--net 31,156
---------------
Total income 2,061,117
---------------
Expenses
Investment advisory fees $ 1,286,270
Account maintenance and distribution fees--Class B 681,995
Account maintenance and distribution fees--Class C 433,073
Transfer agent fees--Class B 195,734
Transfer agent fees--Class C 128,828
Transfer agent fees--Class I 126,650
Account maintenance fees--Class A 85,569
Transfer agent fees--Class A 84,878
Accounting services 82,920
Registration fees 33,844
Printing and shareholder reports 33,053
Custodian fees 31,288
Professional fees 28,196
Directors' fees and expenses 10,780
Account maintenance and distribution fees--Class R 5,343
Transfer agent fees--Class R 2,635
Pricing fees 584
Other 18,680
---------------
Total expenses 3,270,320
---------------
Investment loss--net (1,209,203)
---------------
Realized & Unrealized Gain (Loss) on Investments
Realized gain from investments--net 31,542,520
Change in unrealized appreciation from investments--net (26,598,490)
---------------
Total realized and unrealized gain--net 4,944,030
---------------
Net Increase in Net Assets Resulting from Operations $ 3,734,827
===============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
July 31, January 31,
Increase (Decrease) in Net Assets: 2004 2004
Operations
Investment loss--net $ (1,209,203) $ (2,505,111)
Realized gain (loss) on investments--net 31,542,520 (2,979,434)
Change in unrealized appreciation/depreciation on investments--net (26,598,490) 113,884,149
--------------- ---------------
Net increase in net assets resulting from operations 3,734,827 108,399,604
--------------- ---------------
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions 13,348,306 (3,271,592)
--------------- ---------------
Net Assets
Total increase in net assets 17,083,133 105,128,012
Beginning of period 378,738,470 273,610,458
--------------- ---------------
End of period* $ 395,821,603 $ 378,738,470
=============== ===============
*Accumulated investment loss--net $ (1,209,203) --
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
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: 2004 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 17.39 $ 12.29 $ 17.04 $ 16.14 $ 14.05
---------- ---------- ---------- ---------- ----------
Investment income (loss)--net*** (.02) (.05) (.04) --++ --++++
Realized and unrealized gain (loss) on
investments--net .24 5.15 (4.40) 1.60 4.27
---------- ---------- ---------- ---------- ----------
Total from investment operations .22 5.10 (4.44) 1.60 4.27
---------- ---------- ---------- ---------- ----------
Less distributions from realized gain on
investments--net -- -- (.31) (.70) (2.18)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.61 $ 17.39 $ 12.29 $ 17.04 $ 16.14
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 1.27%+++ 41.50% (26.12%) 10.31% 33.66%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.27%* 1.34% 1.37% 1.36% 1.78%
========== ========== ========== ========== ==========
Investment income (loss)--net (.23%)* (.34%) (.26%) (.02%) .02%
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 69,137 $ 62,061 $ 31,504 $ 36,225 $ 7,757
========== ========== ========== ========== ==========
Portfolio turnover 41.55% 86.16% 73.90% 98.94% 153.48%
========== ========== ========== ========== ==========
* 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 OPPORTUNITIES FUND, JULY 31, 2004
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: 2004 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 16.72 $ 11.90 $ 16.64 $ 15.86 $ 13.72
---------- ---------- ---------- ---------- ----------
Investment loss--net*** (.09) (.16) (.15) (.12) (.11)
Realized and unrealized gain (loss) on
investments--net .23 4.98 (4.29) 1.56 4.17
---------- ---------- ---------- ---------- ----------
Total from investment operations .14 4.82 (4.44) 1.44 4.06
---------- ---------- ---------- ---------- ----------
Less distributions from realized gain on
investments--net -- -- (.30) (.66) (1.92)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.86 $ 16.72 $ 11.90 $ 16.64 $ 15.86
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share .84%++ 40.50% (26.75%) 9.45% 32.50%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.05%* 2.15% 2.17% 2.17% 2.62%
========== ========== ========== ========== ==========
Investment loss--net (1.01%)* (1.14%) (1.05%) (.78%) (.80%)
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 129,307 $ 139,610 $ 115,748 $ 162,316 $ 67,062
========== ========== ========== ========== ==========
Portfolio turnover 41.55% 86.16% 73.90% 98.94% 153.48%
========== ========== ========== ========== ==========
* 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 OPPORTUNITIES FUND, JULY 31, 2004
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: 2004 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 16.68 $ 11.88 $ 16.61 $ 15.84 $ 13.70
---------- ---------- ---------- ---------- ----------
Investment loss--net*** (.09) (.16) (.15) (.12) (.12)
Realized and unrealized gain (loss) on
investments--net .23 4.96 (4.27) 1.55 4.18
---------- ---------- ---------- ---------- ----------
Total from investment operations .14 4.80 (4.42) 1.43 4.06
---------- ---------- ---------- ---------- ----------
Less distributions from realized gain on
investments--net -- -- (.31) (.66) (1.92)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 16.82 $ 16.68 $ 11.88 $ 16.61 $ 15.84
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share .84%++ 40.40% (26.73%) 9.38% 32.55%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 2.06%* 2.16% 2.19% 2.19% 2.65%
========== ========== ========== ========== ==========
Investment loss--net (1.02%)* (1.15%) (1.07%) (.79%) (.84%)
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 85,557 $ 84,755 $ 67,233 $ 80,227 $ 37,475
========== ========== ========== ========== ==========
Portfolio turnover 41.55% 86.16% 73.90% 98.94% 153.48%
========== ========== ========== ========== ==========
* 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 OPPORTUNITIES FUND, JULY 31, 2004
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: 2004 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of period $ 17.56 $ 12.38 $ 17.12 $ 16.20 $ 14.13
---------- ---------- ---------- ---------- ----------
Investment income (loss)--net*** --++++ (.01) --++ .03 --++
Realized and unrealized gain (loss) on
investments--net .25 5.19 (4.42) 1.62 4.33
---------- ---------- ---------- ---------- ----------
Total from investment operations .25 5.18 (4.42) 1.65 4.33
---------- ---------- ---------- ---------- ----------
Less distributions from realized gain on
investments--net -- -- (.32) (.73) (2.26)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.81 $ 17.56 $ 12.38 $ 17.12 $ 16.20
========== ========== ========== ========== ==========
Total Investment Return**
Based on net asset value per share 1.42%+++ 41.84% (25.92%) 10.56% 34.01%
========== ========== ========== ========== ==========
Ratios to Average Net Assets
Expenses 1.02%* 1.09% 1.12% 1.10% 1.47%
========== ========== ========== ========== ==========
Investment income (loss)--net .02%* (.09%) (.01%) .19% (.01%)
========== ========== ========== ========== ==========
Supplemental Data
Net assets, end of period (in thousands) $ 108,684 $ 91,845 $ 59,125 $ 72,570 $ 3,770
========== ========== ========== ========== ==========
Portfolio turnover 41.55% 86.16% 73.90% 98.94% 153.48%
========== ========== ========== ========== ==========
* 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 A Shares were redesignated Class I Shares.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Financial Highlights (concluded)
Class R
For the
The following per share data and ratios have been derived Six Months For the Period
from information provided in the financial statements. Ended February 4, 2003++
July 31, to January 31,
Increase (Decrease) in Net Asset Value: 2004 2004
Per Share Operating Performance
Net asset value, beginning of period $ 16.87 $ 11.81
------------ ------------
Investment loss--net*** (.05) (.09)
Realized and unrealized gain on investments--net .24 5.15
------------ ------------
Total from investment operations .19 5.06
------------ ------------
Net asset value, end of period $ 17.06 $ 16.87
============ ============
Total Investment Return**
Based on net asset value per share 1.13%+++ 42.85%+++
============ ============
Ratios to Average Net Assets
Expenses 1.51%* 1.53%*
============ ============
Investment loss--net (.51%)* (.58%)*
============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 3,137 $ 467
============ ============
Portfolio turnover 41.55% 86.16%
============ ============
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Mid Cap Value Opportunities Fund (the "Fund")
(formerly Merrill Lynch MidCap Value 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 U.S. generally accepted accounting
principles, which may require the use of management accruals and
estimates. Actual results may differ from these estimates. These
unaudited financial statements reflect all adjustments, which are,
in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a
normal, recurring nature. The Fund offers multiple classes of
shares. 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--Equity securities that are held by the
Fund that are traded on stock exchanges or the Nasdaq National
Market are valued at the last sale price or official close price on
the exchange, 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. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the
Board of Directors of the Fund. Long positions traded in the over-
the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price or yield equivalent obtained
from one or more dealers or pricing services approved by the Board
of Directors of the Fund. Short positions traded in the OTC market
are valued at the last available ask price. Portfolio securities
that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC
market, the last ask price. Options purchased are valued at their
last sale price in the case of exchange-traded options or, in the
case of options traded in the OTC market, the last bid price. Swap
agreements are valued daily based upon quotations from market
makers. Financial futures contracts and options thereon, which are
traded on exchanges, are valued at their last sale price as of the
close of such exchanges. Obligations with remaining maturities of 60
days or less are valued at amortized cost unless the Investment
Adviser believes that this method no longer produces fair
valuations.
Repurchase agreements are valued at cost plus accrued interest. The
Fund employs pricing services to provide certain securities prices
for the Fund. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Directors of the
Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations.
The procedures of a pricing service and its valuations are reviewed
by the officers of the Fund under the general supervision of the
Fund's Board of Directors. Such valuations and procedures will be
reviewed periodically by the Board of Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government
securities and money market instruments, is substantially completed
each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in
computing the net asset value of the Fund's shares are determined as
of such times. Foreign currency exchange rates also are generally
determined prior to the close of business on the NYSE. Occasionally,
events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and
the close of business on the NYSE that may not be reflected in the
computation of the Fund's net asset value. If events (for example, a
company announcement, market volatility or a natural disaster) occur
during such periods that are expected to materially affect the value
of such securities, those securities may be valued at their fair
value as determined in good faith by the Fund's Board of Directors
or by the Investment Adviser using a pricing service and/or
procedures approved by the Fund's Board of Directors.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Notes to Financial Statements (continued)
(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 movements 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 may 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 may 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.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Notes to Financial Statements (continued)
(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.
(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. MLIM has entered into a Sub-
Advisory Agreement with Merrill Lynch Asset Management U.K. Limited
("MLAM U.K."), an affiliate of MLIM, pursuant to which MLAM U.K.
provides investment advisory services to MLIM with respect to the
Fund. There is no increase in the aggregate fees paid by the Fund
for these services.
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%
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Notes to Financial Statements (continued)
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.
For the six months ended July 31, 2004, 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 $2,065 $ 30,636
Class I $ 82 $ 1,420
For the six months ended July 31, 2004, MLPF&S received contingent
deferred sales charges of $111,123 and $4,419 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, 2004, the Fund lent
securities with a value of $2,770,500 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, 2004, MLIM, LLC
received $13,547 in securities lending agent fees.
In addition, MLPF&S received $96,190 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended July 31, 2004.
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, 2004, the Fund reimbursed MLIM
$4,221 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, 2004 were $157,317,986 and
$159,954,532, respectively.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $13,348,306 and $(3,271,592) for the six months
ended July 31, 2004 and the year ended January 31, 2004,
respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
July 31, 2004 Shares Amount
Shares sold 674,764 $ 12,104,921
Automatic conversion of shares 328,617 5,889,502
---------------- ----------------
Total issued 1,003,381 17,994,423
Shares redeemed (645,697) (11,684,868)
---------------- ----------------
Net increase 357,684 $ 6,309,555
================ ================
Class A Shares for the Year Dollar
Ended January 31, 2004 Shares Amount
Shares sold 1,033,155 $ 14,869,599
Automatic conversion of shares 714,328 10,389,781
---------------- ----------------
Total issued 1,747,483 25,259,380
Shares redeemed (743,365) (10,882,870)
---------------- ----------------
Net increase 1,004,118 $ 14,376,510
================ ================
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
Notes to Financial Statements (concluded)
Class B Shares for the
Six Months Ended Dollar
July 31, 2004 Shares Amount
Shares sold 523,502 $ 9,004,967
Automatic conversion of shares (342,485) (5,889,502)
Shares redeemed (862,860) (14,806,733)
---------------- ----------------
Net decrease (681,843) $ (11,691,268)
================ ================
Class B Shares for the Year Dollar
Ended January 31, 2004 Shares Amount
Shares sold 1,163,630 $ 16,729,114
Automatic conversion of shares (740,282) (10,389,781)
Shares redeemed (1,795,149) (24,689,495)
---------------- ----------------
Net decrease (1,371,801) $ (18,350,162)
================ ================
Class C Shares for the
Six Months Ended Dollar
July 31, 2004 Shares Amount
Shares sold 493,160 $ 8,484,543
Shares redeemed (488,197) (8,383,672)
---------------- ----------------
Net increase 4,963 $ 100,871
================ ================
Class C Shares for the Year Dollar
Ended January 31, 2004 Shares Amount
Shares sold 712,972 $ 10,434,756
Shares redeemed (1,291,213) (18,090,030)
---------------- ----------------
Net decrease (578,241) $ (7,655,274)
================ ================
Class I Shares for the
Six Months Ended Dollar
July 31, 2004 Shares Amount
Shares sold 1,450,496 $ 26,314,811
Shares redeemed (575,821) (10,420,113)
---------------- ----------------
Net increase 874,675 $ 15,894,698
================ ================
Class I Shares for the Year Dollar
Ended January 31, 2004 Shares Amount
Shares sold 2,010,787 $ 31,127,233
Shares redeemed (1,558,315) (23,178,188)
---------------- ----------------
Net increase 452,472 $ 7,949,045
================ ================
Class R Shares for the
Six Months Ended Dollar
July 31, 2004 Shares Amount
Shares sold 202,447 $ 3,537,225
Shares redeemed (46,304) (802,775)
---------------- ----------------
Net increase 156,143 $ 2,734,450
================ ================
Class R Shares for the Period
February 4, 2003++ to Dollar
January 31, 2004 Shares Amount
Shares sold 56,790 $ 901,164
Shares redeemed (29,106) (492,875)
---------------- ----------------
Net increase 27,684 $ 408,289
================ ================
++Commencement of operations.
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 28, 2003, the credit
agreement was renewed for one year under the same terms. The Fund
did not borrow under the credit agreement during the six months
ended July 31, 2004.
6. Capital Loss Carryforward:
On January 31, 2004, the Fund had a net capital loss carryforward of
$19,099,443, of which $3,136,600 expires in 2011 and $15,962,843
expires in 2012. This amount will be available to offset like
amounts of any future taxable gains.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND, JULY 31, 2004
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 OPPORTUNITIES FUND, JULY 31, 2004
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third
quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are
available on the SEC's Web site at http://www.sec.gov. The Fund's
Forms N-Q may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers 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 Web site
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 OPPORTUNITIES FUND, JULY 31, 2004
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to
this semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable
Item 8 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 9 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 10 - Controls and Procedures
10(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.
10(b) - There were no changes in the registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year
of the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
Item 11 - Exhibits attached hereto
11(a)(1) - Code of Ethics - Not Applicable to this semi-annual
report
11(a)(2) - Certifications - Attached hereto
11(a)(3) - Not Applicable
11(b) - Certifications - 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 Opportunities Fund of
The Asset Program, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch Mid Cap Value Opportunities Fund of
The Asset Program, Inc.
Date: September 17, 2004
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 Opportunities Fund of
The Asset Program, Inc.
Date: September 17, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Mid Cap Value Opportunities Fund of
The Asset Program, Inc.
Date: September 17, 2004