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 811-07177
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: Robert C. Doll, Jr., Chief
Executive Officer, 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: 01/31/05
Date of reporting period: 02/01/04 - 01/31/05
Item 1 - Report to Stockholders
BULL LOGO
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
Mid Cap Value
Opportunities Fund
Annual Report
January 31, 2005
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 of
The Asset Program, Inc.
Box 9011
Princeton, NJ
08543-9011
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Merrill Lynch Mid Cap Value Opportunities Fund
Portfolio Information as of January 31, 2005
Percent of
Ten Largest Equity Holdings Net Assets
WebMD Corp. 2.6%
Convergys Corp. 2.6
Diamond Offshore Drilling 2.3
Sovereign Bancorp, Inc. 2.2
Sungard Data Systems, Inc. 2.1
Foot Locker, Inc. 1.9
Fluor Corp. 1.9
Tech Data Corp. 1.8
E*Trade Financial Corp. 1.8
Raytheon Co. 1.8
Percent of
Sector Representation of Total
Equity Holdings Investments
Financials 22.8%
Information Technology 19.2
Industrials 15.7
Health Care 12.3
Consumer Discretionary 11.1
Energy 10.1
Materials 3.9
Consumer Staples 3.3
Utilities 1.6
Percent of
Five Largest Industries* Net Assets
IT Services 6.5%
Diversified Financial Services 5.6
Energy Equipment & Services 5.2
Electronic Equipment & Services 5.1
Oil & Gas 4.7
*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.
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.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
A Letter From the President
Dear Shareholder
The U.S. equity market ended the current reporting period in
positive territory, although not without some suspense along the
way. Fixed income markets also performed well, with high yield bond
investors enjoying some of the best returns.
Total Returns as of January 31, 2005 6-month 12-month
Equities (Standard & Poor's 500 Index) +8.16% +6.23%
Fixed income (Lehman Brothers Aggregate Bond Index) +3.81 +4.16
Tax-exempt fixed income
(Lehman Brothers Municipal Bond Index) +4.80 +4.86
High yield bonds
(Credit Suisse First Boston High Yield Index) +7.85 +9.81
Over the past year, the U.S. economy transitioned from dependence on
record monetary and fiscal stimulus to a broad-based, high-
productivity, high-profit-margin growth engine. The year also marked
the end of one of the most aggressive Federal Reserve Board (Fed)
policy periods in history as deflation concerns, prevalent at the
beginning of 2004, gave way to modest inflation scares - notably,
food prices in the spring and energy prices in the fall.
The Fed more than doubled the federal funds rate, increasing it from
1% to 2.25% in five separate moves between June and December 2004.
Yet, even as the Fed raised its target short-term interest rate,
long-term bond yields were little changed year over year as buying
interest on the part of foreign central banks remained strong. The
yield on the 10-year Treasury note stood at 4.14% on January 31,
2005. Despite very strong earnings growth, stocks remained in a
narrow trading range for most of 2004, but rebounded nicely in the
fourth quarter as election uncertainties and energy price concerns
dissipated. January, the first month of the new year and the final
month of the current reporting period, was a challenging one for
equities as reflected in the -2.44% return of the S&P 500 Index for
the month.
As we ended the current reporting period, the economy and earnings
growth were beginning to slow and the Fed appeared poised to
continue moving interest rates higher (and, in fact, raised the
federal funds rate another 25 basis points on February 2, 2005).
Progress was being monitored on many fronts in Washington, although
concerns remained about the structural problems of debt and
deficits, as reflected by a significant decline in the U.S. dollar.
Looking ahead, the environment is likely to be a challenging one for
investors. At the start of the new year, we encourage you to meet
with your financial advisor to review your goals and asset
allocation and to rebalance your portfolio, as necessary, to ensure
it remains aligned with your objectives and risk tolerance. As
always, 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,
Robert C. Doll, Jr.
President and Director
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
A Discussion With Your Fund's Portfolio Manager
Merrill Lynch Mid Cap Value Opportunities Fund delivered competitive
returns relative to its benchmark, benefiting from favorable stock
selection in the technology and energy sectors.
How did the Fund perform during the fiscal year in light of the
existing market conditions?
For the 12-month period ended January 31, 2005, Merrill Lynch Mid
Cap Value Opportunities Fund's Class A, Class B, Class C, Class I
and Class R Shares had total returns of +11.90%, +11.00%, +11.03%,
+12.24% and +11.68%, 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 - 9 of this report to shareholders.) Fund returns were competitive
with the +11.10% return of the benchmark Standard & Poor's (S&P)
MidCap 400 Index but trailed the +13.25% average return of the
Lipper Mid Cap Value Funds category for the same period. (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.)
Despite some challenges, U.S. equities ended the 12-month period in
positive territory. The stock market performed strongly in the early
months, but turned more volatile in the second and third quarters,
based on election uncertainty, continued violence in Iraq and record-
high oil prices. Relief came with the conclusion of the U.S.
presidential election in November, and equities turned upward for
the remainder of calendar year 2004.
Small cap stocks were the market leaders, with the S&P Small Cap 600
Index providing a 12-month return of +16.52% as of January 31, 2005.
In contrast, the S&P 500 Index of large-capitalization stocks
returned +6.23% for the same period. The value style of investing
outpaced growth. The S&P MidCap 400 Barra Value Index recorded a one-
year return of +12.68% as of January 31, 2005, while the S&P MidCap
400 Barra Growth Index returned +9.49%.
Relative to the S&P MidCap 400 Index, the Fund's 12-month returns
were hindered by stock selection in the financials, health care and
materials sectors. Holdings in these sectors, although providing
sharply positive returns, failed to keep up with comparable
companies in the benchmark index as investors returned to small
speculative stocks in the final months of the fiscal year. Holdings
that contributed positively to the Fund's 12-month results included
Parametric Technology Corp., a provider of design software; Diamond
Offshore Drilling, a deep water drilling company; and CNF Inc., a
transportation and logistics company.
What changes were made to the portfolio during the period?
During the year, we trimmed the Fund's exposure to the consumer
discretionary sector. We believe that rapid growth in consumer
spending has largely run its course and is likely to decline with
higher energy prices and an anticipated slowdown in mortgage-
refinancing activity. We eliminated several retail holdings,
including Abercrombie & Fitch Co., Federated Department Stores, Inc.
and Limited Brands, Inc. We reduced exposure to restaurant stocks
with the sale of Outback Steakhouse, Inc. and Darden Restaurants,
Inc. We also reduced exposure to the materials sector when many
stocks exceeded our price objectives. We trimmed exposure to steel-
related stocks by eliminating our positions in International Steel
Group, Inc., a producer of steel products, and Steel Dynamics Inc.,
an operator of steel mini-mills.
We have been active buyers in the health care sector, particularly
of specialty pharmaceutical stocks. We believe that valuations are
compelling by historical standards given widespread concern about
generic competition. Some of these concerns are justified but, in
certain circumstances, we believe investors may be underestimating
the ability of specialty pharmaceutical companies to respond with
licensing agreements and further market consolidation. There are
specific steps companies can take to strengthen their competitive
position. Additions to the portfolio within the health care sector
included Shire Pharmaceuticals Plc, a specialty pharmaceuticals
company; Chiron Corp., a biopharmaceutical company; and Cephalon,
Inc., a biopharmaceutical company.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
During the summer months, we rebuilt the Fund's exposure to
information technology given extreme stock price weakness and what
we believed to be 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. One important addition
to the portfolio was Ascential Software Corp., a provider of
enterprise software integration solutions. We previously owned
shares of Ascential Software, having sold them on share price
appreciation in 2003. We repurchased the stock based on strength of
management, the company's balance sheet and a compelling valuation
level.
How would you characterize the Fund's position at the close of the
period?
Relative to the S&P MidCap 400 Index, the Fund ended the period
overweight in the technology, industrials and energy sectors. We
were underweight in the consumer discretionary and financials
sectors. In general, we see less opportunity in the equity market
than just six months ago. Following the 2004 year-end rally in
equities, there are fewer variations in valuation and no single
sector stands out. Speculative stocks rallied sharply, and much of
the opportunity we identified going into the presidential election
has been rewarded with share price appreciation. As a result, we
entered 2005 with a more cautious stance and a higher median market
cap.
Looking ahead, we are concerned that further meaningful
outperformance of very small companies is unsustainable.
Nonetheless, we are finding abundant new investments in the mid cap
value area. In Merrill Lynch Mid Cap Value Opportunities Fund,
recent purchases are focused on companies in the $2 billion to $5
billion range, where we believe investment opportunities are most
plentiful.
R. Elise Baum, CFA
Vice President and Portfolio Manager
February 11, 2005
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
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 (front-end
load) of 5.25% and an account maintenance fee of 0.25% per year (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% per year and an account maintenance fee of 0.25% per
year. These shares automatically convert to Class A Shares after
approximately eight years. (There is no initial sales charge for
automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
* Class C Shares are subject to a distribution fee of 0.75% per year
and an account maintenance fee of 0.25% per year. 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% per year and an account maintenance fee of
0.25% per year. 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
performance data current to the most recent month-end. 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 January 31, 2005 Total Return Total Return Total Return
ML Mid Cap Value Opportunities Fund--Class A Shares* +10.50% +11.90% +228.76%
ML Mid Cap Value Opportunities Fund--Class B Shares* +10.08 +11.00 +207.35
ML Mid Cap Value Opportunities Fund--Class C Shares* +10.10 +11.03 +202.28
ML Mid Cap Value Opportunities Fund--Class I Shares* +10.67 +12.24 +237.02
ML Mid Cap Value Opportunities Fund--Class R Shares* +10.43 +11.68 + 59.52
S&P MidCap 400 Index** +12.24 +11.10 +327.29/+60.13
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Cumulative
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
JANUARY 31, 2005
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class A & Class B Shares
A line graph illustrating the total return on Class A and Class B
shares in comparison to the S&P MidCap 400 Index++++. The values
illustrated are:
ML Mid Cap Value Opportunities Fund++ --
Class A Shares*
Date Total Return
2/1/1995** $ 9,475
1/31/1996 11,360
1/31/1997 13,953
1/31/1998 16,310
1/31/1999 17,646
1/31/2000 18,060
1/31/2001 24,139
1/31/2002 26,628
1/31/2003 19,673
1/31/2004 27,837
1/31/2005 31,150
ML Mid Cap Value Opportunities Fund++ --
Class B Shares*
Date Total Return
2/1/1995** $10,000
1/31/1996 11,889
1/31/1997 14,481
1/31/1998 16,785
1/31/1999 18,013
1/31/2000 18,274
1/31/2001 24,214
1/31/2002 26,501
1/31/2003 19,411
1/31/2004 27,466
1/31/2005 30,735
S&P MidCap 400 Index++++
Date Total Return
2/1/1995** $10,000
1/31/1996 13,092
1/31/1997 15,960
1/31/1998 19,956
1/31/1999 23,289
1/31/2000 27,016
1/31/2001 33,393
1/31/2002 32,300
1/31/2003 26,945
1/31/2004 38,459
1/31/2005 42,729
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Mid Cap Value Opportunities Fund invests in common stocks of
mid cap companies.
++++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.
Past performance is not predictive of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 1/31/05 +11.90% + 6.03%
Five Years Ended 1/31/05 +11.52 +10.32
Inception (2/01/95) through
1/31/05 +12.64 +12.04
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Return Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 1/31/05 +11.00% + 7.00%
Five Years Ended 1/31/05 +10.62 +10.36
Inception (2/01/95) through
1/31/05 +11.89 +11.89
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Performance Data (continued)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class C & Class I Shares
A line graph illustrating the total return on Class C and Class I
shares in comparison to the S&P MidCap 400 Index++++. The values
illustrated are:
ML Mid Cap Value Opportunities Fund++ --
Class C Shares*
Date Total Return
2/1/1995** $10,000
1/31/1996 11,889
1/31/1997 14,484
1/31/1998 16,791
1/31/1999 18,006
1/31/2000 18,254
1/31/2001 24,195
1/31/2002 26,466
1/31/2003 19,391
1/31/2004 27,225
1/31/2005 30,228
ML Mid Cap Value Opportunities Fund++ --
Class I Shares*
Date Total Return
2/1/1995** $ 9,475
1/31/1996 11,379
1/31/1997 14,019
1/31/1998 16,419
1/31/1999 17,816
1/31/2000 18,274
1/31/2001 24,488
1/31/2002 27,075
1/31/2003 20,057
1/31/2004 28,449
1/31/2005 31,932
S&P MidCap 400 Index++++
Date Total Return
2/1/1995** $10,000
1/31/1996 13,092
1/31/1997 15,960
1/31/1998 19,956
1/31/1999 23,289
1/31/2000 27,016
1/31/2001 33,393
1/31/2002 32,300
1/31/2003 26,945
1/31/2004 38,459
1/31/2005 42,729
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Mid Cap Value Opportunities Fund invests in common stocks of
mid cap companies.
++++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.
Past performance is not predictive of future results.
Average Annual Total Return
Return Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 1/31/05 +11.03% +10.03%
Five Years Ended 1/31/05 +10.61 +10.61
Inception (2/01/95) through
1/31/05 +11.70 +11.70
*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 1/31/05 +12.24% + 6.35%
Five Years Ended 1/31/05 +11.81 +10.61
Inception (2/01/95) through
1/31/05 +12.92 +12.31
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Performance Data (concluded)
TOTAL RETURN BASED ON A $10,000 INVESTMENT
Class R Shares
A line graph illustrating the total return on Class R
shares in comparison to the S&P MidCap 400 Index++++.
The values illustrated are:
ML Mid Cap Value Opportunities Fund++ --
Class R Shares*
Date Total Return
2/4/2003** $10,000
1/31/2004 14,285
1/31/2005 15,952
S&P MidCap 400 Index++++
Date Total Return
2/4/2003** $10,000
1/31/2004 14,413
1/31/2005 16,013
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Mid Cap Value Opportunities Fund invests in common stocks of
mid cap companies.
++++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.
P
ast performance is not predictive of future results.
Average Annual Total Return
Class R Shares Return
One Year Ended 1/31/05 +11.68%
Inception (2/04/03) through 1/31/05 +26.47
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
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 August 1, 2004 and
held through January 31, 2005) 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 August 1, 2004 to
August 1, 2004 January 31, 2005 January 31, 2005
Actual
Class A $1,000 $1,105.00 $ 6.69
Class B $1,000 $1,100.80 $10.86
Class C $1,000 $1,101.00 $10.86
Class I $1,000 $1,106.70 $ 5.36
Class R $1,000 $1,104.30 $ 8.01
Hypothetical
(5% annual return before expenses)**
Class A $1,000 $1,018.85 $ 6.41
Class B $1,000 $1,014.87 $10.41
Class C $1,000 $1,014.87 $10.41
Class I $1,000 $1,020.11 $ 5.14
Class R $1,000 $1,017.59 $ 7.68
*For each class of the Fund, expenses are equal to the annualized
expense ratio for the class (1.26% for Class A, 2.05% for Class B,
2.05% for Class C, 1.01% for Class I and 1.51% for Class R),
multiplied by the average account value over the period, multiplied
by 184/365 (to reflect the one-half year period shown).
**Hypothetical 5% annual return before expenses is calculated by pro-
rating the number of days in the most recent fiscal half-year
divided by 365.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Schedule of Investments (in U.S. dollars)
North
America Industry* Shares Held Common Stocks Value
United States-- Aerospace & Defense--1.8% 207,800 Raytheon Co. $ 7,771,720
96.3%
Auto Components--0.8% 128,700 American Axle & Manufacturing
Holdings, Inc. 3,455,595
Biotechnology--2.7% 30,400 ++Cephalon, Inc. 1,495,680
44,200 ++Chiron Corp. (j) 1,451,970
252,900 ++Human Genome Sciences, Inc. 3,022,155
255,500 ++Maxygen, Inc. 2,809,222
123,800 ++Medimmune, Inc. (j) 2,928,489
---------------
11,707,516
Building Products--1.0% 119,100 Masco Corp. (j) 4,382,880
Capital Markets--2.8% 580,900 ++E*Trade Financial Corp. 7,987,375
290,700 Janus Capital Group, Inc. 4,311,081
---------------
12,298,456
Chemicals--0.7% 61,900 Valspar Corp. 3,033,100
Commercial Banks--4.6% 110,300 Banknorth Group, Inc. 3,955,358
295,000 The Colonial BancGroup, Inc. 5,953,100
95,600 Compass Bancshares, Inc. 4,476,948
164,175 First Midwest Bancorp, Inc. 5,664,038
---------------
20,049,444
Commercial Services 56,800 Avery Dennison Corp. 3,413,112
& Supplies--4.2% 282,000 Cendant Corp. 6,641,100
99,500 Cintas Corp. 4,328,250
97,400 ++Corrections Corp. of America 4,002,166
---------------
18,384,628
Communications 285,600 ++CommScope, Inc. 4,292,568
Equipment--1.9% 577,200 ++Tellabs, Inc. 4,109,664
---------------
8,402,232
Construction &
Engineering--1.9% 156,400 Fluor Corp. 8,373,656
Construction
Materials--1.0% 77,300 Martin Marietta Materials, Inc. 4,175,746
Containers &
Packaging--1.7% 281,200 ++Crown Holdings, Inc. 3,793,388
251,900 ++Smurfit-Stone Container Corp. 3,788,576
---------------
7,581,964
Diversified Financial 54,700 Financial Select Sector SPDR Fund (f)(j) 1,633,889
Services--5.6% 50,000 iShares Russell 2000 Index Fund (j)(l) 6,212,000
40,500 iShares S&P SmallCap 600 Index Fund (d) 6,441,930
54,700 Midcap SPDR Trust Series 1 (b)(j) 6,460,070
28,500 SPDR Trust Series 1 (e)(j) 3,367,275
---------------
24,115,164
Electric Utilities--1.6% 168,700 Cinergy Corp. 6,796,923
Electronic Equipment & 174,700 Anixter International, Inc. 5,840,221
Instruments--5.1% 261,600 ++Ingram Micro, Inc. Class A 4,834,368
190,400 Symbol Technologies, Inc. (j) 3,484,320
190,100 ++Tech Data Corp. 7,989,903
---------------
22,148,812
Energy Equipment 107,300 BJ Services Co. 5,155,765
& Services--5.2% 223,300 Diamond Offshore Drilling 9,773,841
98,000 Energy Select Sector SPDR Fund (g)(j) 3,685,780
45,100 Oil Service HOLDRs Trust (c)(j) 4,012,998
---------------
22,628,384
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Schedule of Investments(in U.S. dollars) (continued)
North America
(continued) Industry* Shares Held Common Stocks Value
United States Food Products--3.2% 188,000 ConAgra Foods, Inc. $ 5,546,000
(continued) 333,600 ++Del Monte Foods Co. (j) 3,763,008
22,100 The JM Smucker Co. 1,030,965
124,400 ++Smithfield Foods, Inc. 3,765,588
---------------
14,105,561
Health Care Equipment 71,900 CR Bard, Inc. 4,874,820
& Supplies--2.1% 131,600 Mentor Corp. 4,120,396
---------------
8,995,216
Health Care Providers 1,495,200 ++WebMD Corp. 11,288,760
& Services--2.6%
Hotels, Restaurants 72,800 Harrah's Entertainment, Inc. 4,603,872
& Leisure--1.1%
Household Durables--0.4% 79,300 Newell Rubbermaid, Inc. 1,706,536
IT Services--6.5% 84,200 Acxiom Corp. 1,943,336
788,200 ++Convergys Corp. 11,263,378
277,600 Sabre Holdings Corp. Class A 5,857,360
336,000 ++Sungard Data Systems, Inc. 9,035,040
---------------
28,099,114
Industrial
Conglomerates--0.4% 30,900 Teleflex, Inc. 1,568,175
Insurance--4.7% 115,300 ACE Ltd. 5,004,020
318,400 ++Conseco, Inc. 6,065,520
72,300 First American Corp. 2,673,654
158,900 Protective Life Corp. 6,540,324
---------------
20,283,518
Internet Software 3,055,146 ++Vignette Corp. 4,002,241
& Services--0.9%
Leisure Equipment 313,500 Mattel, Inc. 6,097,575
& Products--1.4%
Machinery--3.2% 80,500 Eaton Corp. 5,473,195
53,300 ITT Industries, Inc. 4,545,957
100,400 Reliance Steel & Aluminum Co. 3,852,348
---------------
13,871,500
Media--2.8% 170,200 Harte-Hanks, Inc. 4,501,790
58,900 Knight-Ridder, Inc. 3,834,979
79,100 ++Paxson Communications Corp. 129,724
226,800 The Reader's Digest Association,
Inc. Class A 3,656,016
---------------
12,122,509
Metals & Mining--0.4% 236,200 ++GrafTech International Ltd. 1,922,668
Oil & Gas--4.7% 52,000 Murphy Oil Corp. 4,642,560
100,000 Noble Energy, Inc. 5,917,000
56,400 Sunoco, Inc. 4,934,436
105,500 Unocal Corp. 5,018,635
---------------
20,512,631
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Schedule of Investments (continued) (in U.S. dollars)
North America
(concluded) Industry* Shares Held Common Stocks Value
United States Pharmaceuticals--2.8% 631,000 ++King Pharmaceuticals, Inc. $ 6,631,810
(concluded) 153,200 Medicis Pharmaceutical Corp.
Class A 5,530,520
---------------
12,162,330
Real Estate--1.4% 155,800 Equity Office Properties Trust (j) 4,359,284
91,400 Friedman Billings Ramsey Group,
Inc. Class A 1,798,752
---------------
6,158,036
Road & Rail--2.1% 150,200 CSX Corp. 6,003,494
98,000 USF Corp. 3,230,080
---------------
9,233,574
Semiconductors & 87,300 ++DSP Group, Inc. 2,165,913
Semiconductor
Equipment--0.5%
Software--3.9% 406,300 ++Ascential Software Corp. (j) 5,814,153
182,200 ++Compuware Corp. 1,257,180
95,700 ++Filenet Corp. 2,138,895
96,112 ++JDA Software Group, Inc. 1,155,266
59,000 Nasdaq-100 Index Tracking Stock (j)(k) 2,206,600
670,300 ++Parametric Technology Corp. 3,820,710
44,400 ++Siebel Systems, Inc. 386,724
---------------
16,779,528
Specialty Retail--4.5% 313,000 Foot Locker, Inc. 8,425,960
194,500 ++Linens `N Things, Inc. 5,037,550
237,200 TJX Cos., Inc. 5,939,488
---------------
19,402,998
Thrifts &
Mortgage Finance--3.2% 115,800 New York Community Bancorp, Inc. 2,064,714
418,900 Sovereign Bancorp, Inc. (j) 9,525,786
54,600 Webster Financial Corp. 2,448,810
---------------
14,039,310
Trading Companies 61,000 WW Grainger, Inc. 3,733,810
& Distributors--0.9%
Total Common Stocks in
North America--96.3% 418,161,595
Western Europe
Switzerland--0.1% Biotechnology--0.1% 26,300 Serono SA (a) 406,072
Total Common Stocks in Switzerland 406,072
United Kingdom
- --1.8% Pharmaceuticals--1.8% 220,500 Shire Pharmaceuticals Plc (a) 7,717,500
Total Common Stocks in the
United Kingdom 7,717,500
Total Common Stocks in
Western Europe--1.9% 8,123,572
Total Common Stocks
(Cost--$357,959,247)--98.2% 426,285,167
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Schedule of Investments (concluded) (in U.S. dollars)
Beneficial Interest Short-Term Securities Value
$10,814,473 Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I (h) $ 10,814,473
47,964,950 Merrill Lynch Liquidity Series,
LLC Money Market Series (h)(i) 47,964,950
Total Short-Term Securities
(Cost--$58,779,423)--13.5% 58,779,423
Total Investments (Cost--$416,738,670**)--111.7% 485,064,590
Liabilities in Excess of Other Assets--(11.7%) (50,958,071)
---------------
Net Assets--100.0% $ 434,106,519
===============
++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.These industry classifications
are unaudited.
**The cost and unrealized appreciation (depreciation) of investments
as of January 31, 2005, as computed for federal income tax purposes,
were as follows:
Aggregate cost $419,582,669
============
Gross unrealized appreciation $ 75,996,658
Gross unrealized depreciation (10,514,737)
------------
Net unrealized appreciation $ 65,481,921
============
(a)Depositary Receipts.
(b)Represents ownership in MidCap SPDR Trust, a registered unit
investment trust. The investment objective of the MidCap 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 SPDR Trust Series 1, a registered unit
investment trust. The investment objective of the SPDR Trust Series
1 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 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 expensescorresponds 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 $ 4,607,987 $246,562
Merrill Lynch Liquidity Series,
LLC Money Market Series $ (218,200) $46,829
Merrill Lynch Premier
Institutional Fund (16,061,050) $ 4,664
(i)Security was purchased with the cash proceeds from securities
loans.
(j)Security, or a portion of security, is on loan.
(k)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.
(l)iShares Russell 2000 Index Fund is an exchange traded fund. The
Fund seeks investment results that correspond to the performance of
the Russell 2000 Index.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Statement of Assets and Liabilities
As of January 31, 2005
Assets
Investments in unaffiliated securities, at value
(including securities loaned of $46,996,548)
(identified cost--$357,959,247) $ 426,285,167
Investments in affiliated securities, at value
(identified cost--$58,779,423) 58,779,423
Receivables:
Securities sold $ 8,405,596
Capital shares sold 726,918
Dividends 258,109
Interest from affiliates 20,700
Securities lending 2,744 9,414,067
--------------
Prepaid expenses 28,600
--------------
Total assets 494,507,257
--------------
Liabilities
Collateral on securities loaned, at value 47,964,950
Payables:
Securities purchased 11,013,195
Capital shares redeemed 720,286
Investment adviser 237,089
Distributor 203,322
Other affiliates 181,730 12,355,622
--------------
Accrued expenses and other liabilities 80,166
--------------
Total liabilities 60,400,738
--------------
Net Assets
Net assets $ 434,106,519
==============
Net Assets Consist of
Class A Shares of Capital Stock, $.10 par value,
40,000,000 shares authorized $ 440,578
Class B Shares of Capital Stock, $.10 par value,
40,000,000 shares authorized 678,986
Class C Shares of Capital Stock, $.10 par value,
40,000,000 shares authorized 488,174
Class I Shares of Capital Stock, $.10 par value,
20,000,000 shares authorized 646,986
Class R Shares of Capital Stock, $.10 par value,
40,000,000 shares authorized 39,324
Paid-in capital in excess of par 353,627,638
Undistributed realized capital gains--net $ 9,858,913
Unrealized appreciation--net 68,325,920
--------------
Total accumulated earnings--net 78,184,833
--------------
Net Assets $ 434,106,519
==============
Net Asset Value
Class A--Based on net assets of $85,183,629 and 4,405,776
shares outstanding $ 19.33
==============
Class B--Based on net assets of $125,145,218 and 6,789,858
shares outstanding $ 18.43
==============
Class C--Based on net assets of $89,770,788 and 4,881,740
shares outstanding $ 18.39
==============
Class I--Based on net assets of $126,651,078 and 6,469,862
shares outstanding $ 19.58
==============
Class R--Based on net assets of $7,355,806 and 393,236
shares outstanding $ 18.71
==============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Statement of Operations
For the Year Ended January 31, 2005
Investment Income
Dividends (net of $3,785 foreign withholding tax) $ 4,018,542
Interest from affiliates 246,562
Securities lending--net 51,493
--------------
Total income 4,316,597
--------------
Expenses
Investment advisory fees $ 2,645,844
Account maintenance and distribution fees--Class B 1,329,223
Account maintenance and distribution fees--Class C 873,766
Transfer agent fees--Class B 374,497
Transfer agent fees--Class I 266,127
Transfer agent fees--Class C 254,227
Account maintenance fees--Class A 183,593
Transfer agent fees--Class A 178,165
Accounting services 170,888
Registration fees 72,801
Custodian fees 65,523
Printing and shareholder reports 62,437
Professional fees 57,790
Directors' fees and expenses 22,446
Account maintenance and distribution fees--Class R 18,363
Transfer agent fees--Class R 8,826
Pricing fees 1,265
Other 47,789
--------------
Total expenses 6,633,570
--------------
Investment loss--net (2,316,973)
--------------
Realized & Unrealized Gain--Net
Realized gain on investments--net 37,752,452
Change in unrealized appreciation on investments--net 8,837,274
--------------
Total realized and unrealized gain--net 46,589,726
--------------
Net Increase in Net Assets Resulting from Operations $ 44,272,753
==============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Statements of Changes in Net Assets
For the Year Ended January 31,
Increase (Decrease) in Net Assets: 2005 2004
Operations
Investment loss--net $ (2,316,973) $ (2,505,111)
Realized gain (loss)--net 37,752,452 (2,979,434)
Change in unrealized appreciation--net 8,837,274 113,884,149
-------------- --------------
Net increase in net assets resulting from operations 44,272,753 108,399,604
-------------- --------------
Distributions to Shareholders
Realized gain--net:
Class A (566,533) --
Class B (916,167) --
Class C (639,671) --
Class I (811,437) --
Class R (41,754) --
-------------- --------------
Net decrease in net assets resulting from distributions
to shareholders (2,975,562) --
-------------- --------------
Capital Share Transactions
Net increase (decrease) in net assets derived from
capital share transactions 14,070,858 (3,271,592)
-------------- --------------
Net Assets
Total increase in net assets 55,368,049 105,128,012
Beginning of year 378,738,470 273,610,458
-------------- --------------
End of year $ 434,106,519 $ 378,738,470
============== ==============
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Financial Highlights
Class A
The following per share data and ratios have been derived For the Year Ended January 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of year $ 17.39 $ 12.29 $ 17.04 $ 16.14 $ 14.05
-------- -------- -------- -------- --------
Investment income (loss)--net* (.04) (.05) (.04) --++ --++++
Realized and unrealized gain (loss)--net 2.11 5.15 (4.40) 1.60 4.27
-------- -------- -------- -------- --------
Total from investment operations 2.07 5.10 (4.44) 1.60 4.27
-------- -------- -------- -------- --------
Less distributions from realized gain--net (.13) -- (.31) (.70) (2.18)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.33 $ 17.39 $ 12.29 $ 17.04 $ 16.14
======== ======== ======== ======== ========
Total Investment Return**
Based on net asset value per share 11.90% 41.50% (26.12%) 10.31% 33.66%
======== ======== ======== ======== ========
Ratios to Average Net Assets
Expenses 1.26% 1.34% 1.37% 1.36% 1.78%
======== ======== ======== ======== ========
Investment income (loss)--net (.20%) (.34%) (.26%) (.02%) .02%
======== ======== ======== ======== ========
Supplemental Data
Net assets, end of year (in thousands) $ 85,184 $ 62,061 $ 31,504 $ 36,225 $ 7,757
======== ======== ======== ======== ========
Portfolio turnover 82.43% 86.16% 73.90% 98.94% 153.48%
======== ======== ======== ======== ========
*Based on average shares outstanding.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $(.01) per share.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Financial Highlights (continued)
Class B
The following per share data and ratios have been derived For the Year Ended January 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of year $ 16.72 $ 11.90 $ 16.64 $ 15.86 $ 13.72
-------- -------- -------- -------- --------
Investment loss--net* (.17) (.16) (.15) (.12) (.11)
Realized and unrealized gain (loss)--net 2.01 4.98 (4.29) 1.56 4.17
-------- -------- -------- -------- --------
Total from investment operations 1.84 4.82 (4.44) 1.44 4.06
-------- -------- -------- -------- --------
Less distributions from realized gain--net (.13) -- (.30) (.66) (1.92)
-------- -------- -------- -------- --------
Net asset value, end of year $ 18.43 $ 16.72 $ 11.90 $ 16.64 $ 15.86
======== ======== ======== ======== ========
Total Investment Return**
Based on net asset value per share 11.00% 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 (.99%) (1.14%) (1.05%) (.78%) (.80%)
======== ======== ======== ======== ========
Supplemental Data
Net assets, end of year (in thousands) $125,145 $139,610 $115,748 $162,316 $ 67,062
======== ======== ======== ======== ========
Portfolio turnover 82.43% 86.16% 73.90% 98.94% 153.48%
======== ======== ======== ======== ========
*Based on average shares outstanding.
**Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Financial Highlights (continued)
Class C
The following per share data and ratios have been derived For the Year Ended January 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of year $ 16.68 $ 11.88 $ 16.61 $ 15.84 $ 13.70
-------- -------- -------- -------- --------
Investment loss--net* (.18) (.16) (.15) (.12) (.12)
Realized and unrealized gain (loss)--net 2.02 4.96 (4.27) 1.55 4.18
-------- -------- -------- -------- --------
Total from investment operations 1.84 4.80 (4.42) 1.43 4.06
-------- -------- -------- -------- --------
Less distributions from realized gain--net (.13) -- (.31) (.66) (1.92)
-------- -------- -------- -------- --------
Net asset value, end of year $ 18.39 $ 16.68 $ 11.88 $ 16.61 $ 15.84
======== ======== ======== ======== ========
Total Investment Return**
Based on net asset value per share 11.03% 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 (1.00%) (1.15%) (1.07%) (.79%) (.84%)
======== ======== ======== ======== ========
Supplemental Data
Net assets, end of year (in thousands) $ 89,771 $ 84,755 $ 67,233 $ 80,227 $ 37,475
======== ======== ======== ======== ========
Portfolio turnover 82.43% 86.16% 73.90% 98.94% 153.48%
======== ======== ======== ======== ========
*Based on average shares outstanding.
**Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Financial Highlights (continued)
Class I
The following per share data and ratios have been derived For the Year Ended January 31,
from information provided in the financial statements. 2005 2004 2003 2002 2001
Per Share Operating Performance
Net asset value, beginning of year $ 17.56 $ 12.38 $ 17.12 $ 16.20 $ 14.13
-------- -------- -------- -------- --------
Investment income (loss)--net* .01 (.01) --++ .03 --++
Realized and unrealized gain (loss)--net 2.14 5.19 (4.42) 1.62 4.33
-------- -------- -------- -------- --------
Total from investment operations 2.15 5.18 (4.42) 1.65 4.33
-------- -------- -------- -------- --------
Less distributions from realized gain--net (.13) -- (.32) (.73) (2.26)
-------- -------- -------- -------- --------
Net asset value, end of year $ 19.58 $ 17.56 $ 12.38 $ 17.12 $ 16.20
======== ======== ======== ======== ========
Total Investment Return**
Based on net asset value per share 12.24% 41.84% (25.92%) 10.56% 34.01%
======== ======== ======== ======== ========
Ratios to Average Net Assets
Expenses 1.01% 1.09% 1.12% 1.10% 1.47%
======== ======== ======== ======== ========
Investment income (loss)--net .04% (.09%) (.01%) .19% (.01%)
======== ======== ======== ======== ========
Supplemental Data
Net assets, end of year (in thousands) $126,651 $ 91,845 $ 59,125 $ 72,570 $ 3,770
======== ======== ======== ======== ========
Portfolio turnover 82.43% 86.16% 73.90% 98.94% 153.48%
======== ======== ======== ======== ========
*Based on average shares outstanding.
**Total investment returns exclude the effects of sales charges.
++Amount is less than $(.01) per share.
See Notes to Financial Statements.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Financial Highlights (concluded)
Class R
For the For the Period
Year Ended February 4, 2003++
The following per share data and ratios have been derived January 31, to January 31,
from information provided in the financial statements. 2005 2004
Per Share Operating Performance
Net asset value, beginning of period $ 16.87 $ 11.81
--------- ---------
Investment loss--net*** (.08) (.09)
Realized and unrealized gain--net 2.05 5.15
--------- ---------
Total from investment operations 1.97 5.06
--------- ---------
Less distributions from realized gain--net (.13) --
--------- ---------
Net asset value, end of period $ 18.71 $ 16.87
========= =========
Total Investment Return**
Based on net asset value per share 11.68% 42.85%+++
========= =========
Ratios to Average Net Assets
Expenses 1.51% 1.53%*
========= =========
Investment loss--net (.45%) (.58%)*
========= =========
Supplemental Data
Net assets, end of period (in thousands) $ 7,356 $ 467
========= =========
Portfolio turnover 82.43% 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
JANUARY 31, 2005
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Mid Cap Value Opportunities Fund (the "Fund")
(formerly Merrill Lynch Mid Cap 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. 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 (except that Class B shareholders may vote on certain
changes to the Class A distribution plan). Income, expenses (other
than expenses attributable to a specific class) and realized and
unrealized gains and losses 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
JANUARY 31, 2005
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.
(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 OPPORTUNITIES FUND
JANUARY 31, 2005
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) Reclassifications--U.S. generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting. Accordingly,
during the current year, $2,312,853 has been reclassified between
undistributed net realized capital gains and accumulated net investment
loss and $4,120 has been reclassified between paid-in capital in
excess of par and accumulated net investment loss as a result of
permanent differences attributable to net operating losses and
non-deductible expenses. These reclassifications have no effect
on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch 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 Plan 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 Plan 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"), an affiliate of
MLIM, 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 OPPORTUNITIES FUND
JANUARY 31, 2005
Notes to Financial Statements (continued)
For the year ended January 31, 2005, 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 $3,045 $43,606
Class I $ 120 $ 1,991
For the year ended January 31, 2005, MLPF&S received
contingent deferred sales charges of $183,313 and $8,206
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 January 31, 2005, the Fund lent
securities with a value of $13,446,200 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 year ended January 31, 2005, MLIM, LLC received
$22,189 in securities lending agent fees.
In addition, MLPF&S received $170,056 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended January 31, 2005.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Program's transfer agent.
For the year ended January 31, 2005, the Fund reimbursed MLIM $8,712
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 year ended January 31, 2005 were $332,875,272 and
$322,703,304, respectively.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $14,070,858 and $(3,271,592) for the years ended
January 31, 2005 and January 31, 2004, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended January 31, 2005 Shares Amount
Shares sold 1,298,739 $ 23,735,475
Automatic conversion of
shares 617,029 11,257,665
Shares issued to share-
holders in reinvestment
of distributions 27,545 538,231
------------- ------------
Total issued 1,943,313 35,531,371
Shares redeemed (1,105,597) (20,336,916)
------------- ------------
Net increase 837,716 $ 15,194,455
============= ============
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
============= ============
Class B Shares for the Year Dollar
Ended January 31, 2005 Shares Amount
Shares sold 870,574 $ 15,160,268
Shares issued to share-
holders in reinvestment
of distributions 43,801 828,706
------------- ------------
Total issued 914,375 15,988,974
------------- ------------
Shares redeemed (1,831,783) (31,967,958)
Automatic conversion
of shares (644,409) (11,257,665)
------------- ------------
Total redeemed (2,476,192) (43,225,623)
------------- ------------
Net decrease (1,561,817) $(27,236,649)
============= ============
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)
============= ============
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Notes to Financial Statements (concluded)
Class C Shares for the Year Dollar
Ended January 31, 2005 Shares Amount
Shares sold 872,632 $ 15,251,535
Shares issued to share-
holders in reinvestment
of distributions 30,489 567,095
------------- ------------
Total issued 903,121 15,818,630
------------- ------------
Shares redeemed (1,102,141) (19,169,507)
------------- ------------
Net decrease (199,020) $ (3,350,877)
============= ============
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 Year Dollar
Ended January 31, 2005 Shares Amount
Shares sold 2,510,494 $ 46,408,243
Shares issued to share-
holders in reinvestment
of distributions 30,307 599,474
------------- ------------
Total issued 2,540,801 47,007,717
Shares redeemed (1,299,827) (24,035,713)
------------- ------------
Net increase 1,240,974 $ 22,972,004
============= ============
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 Year Dollar
Ended January 31, 2005 Shares Amount
Shares sold 467,520 $ 8,314,504
Shares issued to share-
holders in reinvestment
of distributions 2,208 41,754
------------- ------------
Total issued 469,728 8,356,258
Shares redeemed (104,176) (1,864,333)
------------- ------------
Net increase 365,552 $ 6,491,925
============= ============
Class R Shares for the
Period February 4, 2003++ Dollar
to 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 a
group of 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 .07% 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 defined in the credit
agreement by Bank One, N.A. The Fund did not borrow under the credit
agreement during the year ended January 31, 2005. On November 26,
2004, the credit agreement was renewed for one year under
substantially the same terms.
6. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years
ended January 31, 2005 and January 31, 2004 was as follows:
1/31/2005 1/31/2004
Distributions paid from
net long-term capital
gains $2,975,562 --
---------- -----------
Total taxable distributions $2,975,562 --
========== -----------
As of January 31, 2005, the components of accumulated
earnings on a tax basis were as follows:
Undistributed ordinary income--net $3,056,776
Undistributed long-term capital gains--net 9,646,136
----------
Total undistributed earnings--net 12,702,912
Capital loss carryforward --
Unrealized gains--net 65,481,921*
-----------
Total accumulated earnings--net $78,184,833
===========
*The difference between book-basis and tax-basis net unrealized
gains is attributable primarily to the tax deferral of losses on
wash sales.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
of The Asset Program, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Mid Cap Value Opportunities Fund (formerly Merrill Lynch Mid Cap
Value Fund) of The Asset Program, Inc. (the "Program") as of January
31, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the
Program's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. The Program
is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. An audit includes
consideration of internal control over financial reporting as a
basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Program's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. Our procedures included confirmation of securities
owned as of January 31, 2005, by correspondence with the custodian
and brokers; where replies were not received from brokers, we
performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Merrill Lynch Mid Cap Value Opportunities Fund
of The Asset Program, Inc. as of January 31, 2005, the results of
its operation for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and its
financial highlights for each of the five years in the period then
ended, in conformity with U.S. generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
March 22, 2005
Important Tax Information (unaudited)
Merrill Lynch Mid Cap Value Opportunities Fund distributed long-term
capital gains of $.131133 per share to shareholders of record on
December 15, 2004.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Officers and Directors
Number of
Position(s) Portfolios in Other Public
Held Length of Fund Complex Directorships
with Time Principal Occupation(s) Overseen by Held by
Name Address & Age Fund Served During Past 5 Years Director Director
Interested Director
Robert C. Doll, P.O. Box 9011 President 2005 President of MLIM/FAM-advised funds since 114 Funds None
Jr.* Princeton, NJ and to 2005; President of MLIM and FAM since 2001; 150 Portfolios
08543-9011 Director present Co-Head (Americas Region) thereof from 2000
Age: 50 to 2001 and Senior Vice President from 1999
to 2001; President and Director of Princeton
Services, Inc. since 2001; President of
Princeton Administrators, L.P. since 2001;
Chief Investment Officer of Oppenheimer Funds,
Inc. in 1999 and Executive Vice President
thereof from 1991 to 1999.
* Mr. Doll is a director, trustee or member of an advisory board of
certain other investment companies for which MLIM or FAM acts as
investment adviser. Mr. Doll is an "interested person," as described
in the Investment Company Act, of the Fund based on his current
positions with MLIM, FAM, Princeton Services and Princeton
Administrators, L.P. The Director's term is unlimited. Directors
serve until their resignation, removal or death, or until December
31 of the year in which they turn 72. As Fund President, Mr. Doll
serves at the pleasure of the Board of Directors.
Independent Directors*
James H. Bodurtha P.O. Box 9095 Director 2002 to Director, The China Business Group, Inc. 38 Funds None
Princeton, NJ present since 1996 and Executive Vice President 55 Portfolios
08543-9095 thereof from 1996 to 2003; Chairman of
Age: 60 the Board, Berkshire Holding Corporation
since 1980; Partner, Squire,Sanders &
Dempsey from 1980 to 1993.
Joe Grills P.O. Box 9095 Director 1994 to Member of the Committee of Investment of 38 Funds Kimco
Princeton, NJ present Employee Benefit Assets of the Association 55 Portfolios Realty
08543-9095 of Financial Professionals ("CIEBA") since Corp-
Age: 69 1986; Member of CIEBA's Executive Committee oration
since 1988 and its Chairman from 1991 to 1992;
Assistant Treasurer of International Business
Machines Corporation ("IBM") and Chief
Investment Officer of IBM Retirement Funds
from 1986 to 1993; Member of the Investment
Advisory Committee of the State of New York
Common Retirement Fund since 1989; Member
of the Investment Advisory Committee of the
Howard Hughes Medical Institute from 1997 to
2000; Director, Duke University Management
Company from 1992 to 2004, Vice Chairman
thereof from 1998 to 2004 and Director Emeritus
thereof since 2004; Director, LaSalle Street Fund
from 1995 to 2001; Director, Kimco Realty
Corporation since 1997; Member of the Investment
Advisory Committee of the Virginia Retirement
System since 1998 and Vice Chairman thereof since
2002; Director, Montpelier Foundation since 1998
and its Vice Chairman since 2000; Member of the
Investment Committee of the Woodberry Forest
School since 2000; Member of the Investment
Committee of the National Trust for Historic
Preservation since 2000.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Officers and Directors (continued)
Number of
Position(s) Portfolios in Other Public
Held Length of Fund Complex Directorships
with Time Principal Occupation(s) Overseen by Held by
Name Address & Age Fund Served During Past 5 Years Director Director
Independent Directors* (concluded)
Herbert I. London P.O. Box 9095 Director 2002 to John M. Olin Professor of Humanities, New 38 Funds None
Princeton, NJ present York University since 1993 and Professor 55 Portfolios
08543-9095 thereof since 1980; President, Hudson
Age: 65 Institute since 1997 and Trustee thereof
since 1980; Dean, Gallatin Division of
New York University from 1976 to 1993;
Distinguished Fellow, Herman Kahn Chair,
Hudson Institute from 1984 to 1985; Director,
Damon Corp. from 1991 to 1995; Overseer,
Center for Naval Analyses from 1983 to 1993.
Roberta Cooper P.O. Box 9095 Director 2002 to Shareholder, Modrall, Sperling, Roehl, 38 Funds None
Ramo Princeton, NJ present Harris & Sisk, P.A. since 1993; President, 55 Portfolios
08543-9095 American Bar Association from 1995 to 1996
Age: 62 and Member of the Board of Governors thereof
from 1994 to 1997; Shareholder, Poole, Kelly
& Ramo, Attorneys at Law, P.C. from 1977 to
1993; Director, ECMC Group (service provider
to students, schools and lenders) since 2001;
Director, United New Mexico Bank (now Wells
Fargo) from 1983 to 1988; Director, First
National Bank of New Mexico (now Wells Fargo)
from 1975 to 1976; Vice President, American Law
Institute since 2004.
Robert S. P.O. Box 9095 Director 1996 to Principal of STI Management(investment 38 Funds None
Salomon, Princeton, NJ present adviser)since 1994; Chairman and CEO of 55 Portfolios
Jr. 08543-9095 Salomon Brothers Asset Management from
Age: 68 1992 to 1995; Chairman of Salomon Brothers
equity mutual funds from 1992 to 1995;
regular columnist with Forbes Magazine from
1992 to 2002; Director of Stock Research and
U.S. Equity Strategist at Salomon Brothers
from 1975 to 1991; Trustee, Commonfund from
1980 to 2001.
Stephen B. P.O. Box 9095 Director 1994 to Chairman of Fernwood Advisors, Inc. 39 Funds None
Swensrud Princeton, NJ present (investment adviser) since 1996; Principal, 56 Portfolios
08543-9095 Fernwood Associates (financial consultants)
Age: 71 since 1975; Chairman of R.P.P. Corporation
(manufacturing company) since 1978; Director
of International Mobile Communications,
Incorporated (telecommunications) since 1998.
* The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72.
MERRILL LYNCH MID CAP VALUE OPPORTUNITIES FUND
JANUARY 31, 2005
Officers and Directors (concluded)
Position(s)
Held Length
with of Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers*
Donald C. Burke P.O. Box 9011 Vice 1994 to First Vice President of MLIM and FAM since 1997 and
Princeton, NJ President present Treasurer thereof since 1999; Senior Vice President and
08543-9011 and and Treasurer of Princeton Services since 1999 and Director
Age: 44 Treasurer 1999 to since 2004; Vice President of FAMD since 1999; Vice President
present of MLIM and FAM from 1990 to 1997; Director of Taxation of
MLIM from 1990 to 2001.
Robin Elise Baum P.O. Box 9011 Vice 2000 to Managing Director of MLIM since 2002 (Equities); Director of
Princeton, NJ President present MLIM from 1999 to 2002; Vice President from 1995 to 1999.
08543-9011
Age: 44
Jeffrey Hiller P.O. Box 9011 Chief 2004 to Chief Compliance Officer of the MLIM/FAM-advised funds and
Princeton, NJ Compliance present First Vice Presidentand Chief Compliance Officer of MLIM
08543-9011 Officer (Americas Region) since 2004; Global Director of Compliance at
Age: 53 Morgan Stanley Investment Management from 2002 to 2004;
Managing Director and Global Director of Compliance at
Citigroup Management from 2000 to 2002; Chief Compliance
Officer at Soros Fund Asset Management in 2000; Chief
Compliance Officer at Prudential Financial from 1995 to 2000;
Senior Counsel in the Commission's Division of Enforcement in
Washington, D.C. from 1990 to 1995.
Alice A. P.O. Box 9011 Secretary 2004 to Director (Legal Advisory) of MLIM since 2002; Vice President
Pellegrino Princeton, NJ present of MLIM from 1999 to 2002; Attorney associated with MLIM since
08543-9011 1997; Secretary of MLIM, FAM, FAMD and Princeton Services since 2004.
Age: 44
* Officers of the Fund serve at the pleasure of the Board of
Directors.
Further information about the Fund's Officers and Directors is
available in the Fund's Statement of Additional Information, which
can be obtained without charge by calling 1-800-MER-FUND.
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
Andre F. Perold resigned as a Director of Merrill Lynch Mid Cap
Value Opportunities Fund of The Asset Program, Inc. effective
October 22, 2004.
Effective January 1, 2005, Terry K. Glenn retired as President and
Director of The Fund. The Fund's Board of Directors wishes Mr. Glenn
well in his retirement.
Effective January 1, 2005, Robert C. Doll, Jr. became President and
Director of the Fund.
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 at
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
JANUARY 31, 2005
Item 2 - Code of Ethics - The registrant has adopted 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 and principal accounting officer, or persons
performing similar functions. A copy of the code of ethics is
available without charge upon request by calling toll-free 1-800-MER-
FUND (1-800-637-3863).
Item 3 - Audit Committee Financial Expert - The registrant's board
of directors has determined that (i) the registrant has the
following audit committee financial experts serving on its audit
committee and (ii) each audit committee financial expert is
independent: (1) Joe Grills, (2) Andre F. Perold (resigned as of
October 1, 2004), (3) Robert S. Salomon, Jr., and (4) Stephen B.
Swensrud.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending January 31, 2005 - $28,000
Fiscal Year Ending January 31, 2004 - $25,600
(b) Audit-Related Fees - Fiscal Year Ending January 31, 2005 - $0
Fiscal Year Ending January 31, 2004 - $0
(c) Tax Fees -Fiscal Year Ending January 31, 2005 - $5,700
Fiscal Year Ending January 31, 2004 - $5,200
The nature of the services include tax compliance,
tax advice and tax planning.
(d) All Other Fees - Fiscal Year Ending January 31, 2005 - $0
Fiscal Year Ending January 31, 2004 - $0
(e)(1) The registrant's audit committee (the "Committee") has
adopted policies and procedures with regard to the pre-approval of
services. Audit, audit-related and tax compliance services provided
to the registrant on an annual basis require specific pre-approval
by the Committee. The Committee also must approve other non-audit
services provided to the registrant and those non-audit services
provided to the registrant's affiliated service providers that
relate directly to the operations and the financial reporting of the
registrant. Certain of these non-audit services that the Committee
believes are a) consistent with the SEC's auditor independence rules
and b) routine and recurring services that will not impair the
independence of the independent accountants may be approved by the
Committee without consideration on a specific case-by-case basis
("general pre-approval"). However, such services will only be
deemed pre-approved provided that any individual project does not
exceed $5,000 attributable to the registrant or $50,000 for all of
the registrants the Committee oversees. Any proposed services
exceeding the pre-approved cost levels will require specific pre-
approval by the Committee, as will any other services not subject to
general pre-approval (e.g., unanticipated but permissible services).
The Committee is informed of each service approved subject to
general pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ending January 31, 2005 - $11,220,181
Fiscal Year Ending January 31, 2004 - $18,176,900
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's 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.
Regulation S-X Rule 2-01(c)(7)(ii) - $945,000, 0%
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 - Portfolio Managers of Closed-End Management Investment
Companies - Not Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not
Applicable
Item 11 - Controls and Procedures
11(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.
11(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 second 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 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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/ Robert C. Doll, Jr._______
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Mid Cap Value Opportunities Fund
of The Asset Program, Inc.
Date: March 21, 2005
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/ Robert C. Doll, Jr.________
Robert C. Doll, Jr.,
Chief Executive Officer of
Merrill Lynch Mid Cap Value Opportunities Fund
of The Asset Program, Inc.
Date: March 21, 2005
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: March 21, 2005